Revenue-Maximising Elasticities of Taxable Income in Multi-Rate Income Tax Structures

John Creedy and Norman Gemmell

No 13/27, Treasury Working Paper Series from New Zealand Treasury

Abstract: The empirical literature on the elasticity of taxable income (ETI) sometimes questions whether estimated values are consistent with being on the revenue-increasing section of the Laffer curve, usually in the context of a single rate tax system or for top marginal rates. This paper develops conceptual expressions for this ‘Laffer-maximum’ or revenuemaximising ETI for the multi-rate income tax systems commonly used in practice. Using the New Zealand income tax system in 2010 to illustrate its properties, the paper demonstrates that a wide range of revenue-maximising ETI values can be expected across individual taxpayers, across tax brackets and in aggregate.

Keywords: Income Tax Revenue; Elasticity of taxable income; revenue elasticity, Laffer Curve (search for similar items in EconPapers)
JEL-codes: H24 H26 H31 (search for similar items in EconPapers)
Pages: 28
Date: 2013-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://treasury.govt.nz/sites/default/files/2013-11/twp13-27.pdf (application/pdf)

Related works:
Working Paper: Revenue-Maximising Elasticities of Taxable Income in Multi-Rate Income Tax Structures (2013)
Working Paper: Revenue-Maximising Elasticities of Taxable Income in Multi-Rate Income Tax Structures (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:nzt:nztwps:13/27

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