Do Very High Tax Rates Induce Bunching? Implications for the Design of Income Contingent Loan Schemes
Bruce Chapman and
Andrew Leigh
The Economic Record, 2009, vol. 85, issue 270, 276-289
Abstract:
Under the Higher Education Contribution Scheme graduates face a sharp discontinuity in their taxable incomes. At the first repayment threshold, they are required to pay a percentage of their entire income to reduce their debts. This results in an extremely high effective marginal tax rate. Using a sample of taxpayer returns we investigate whether taxpayers bunch below the repayment threshold. We find a statistically significant degree of bunching below the threshold, but the effect is economically small. The result has important implications for the design of income contingent university loan schemes.
Date: 2009
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https://doi.org/10.1111/j.1475-4932.2009.00554.x
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Working Paper: Do Very High Tax Rates Induce Bunching? Implications for the Design of Income-Contingent Loan Schemes (2006) 
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Persistent link: https://EconPapers.repec.org/RePEc:bla:ecorec:v:85:y:2009:i:270:p:276-289
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