Tax bunching, income shifting and self-employment

Daniel le Maire and Bertel Schjerning

Journal of Public Economics, 2013, vol. 107, issue C, 1-18

Abstract: This paper proposes a dynamic extension to Saez (2010) bunching formula that allows us to distinguish bunching based on real responses and income shifting. We provide direct evidence of income shifting and pronounced bunching in taxable income for the Danish self-employed. If income shifting was neglected in this case, we would estimate a taxable income elasticity in the range of 0.43–0.53 and conclude that taxable incomes were highly sensitive to changes in marginal tax rates. We show, however, that more than half of the bunching in taxable income is driven by intertemporal income shifting, implying a structural elasticity of 0.14–0.20.

Keywords: Self-employment; Tax bunching; Retained profits; Tax avoidance; Income shifting (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (79)

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Working Paper: Tax Bunching, Income Shifting and Self-employment (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:107:y:2013:i:c:p:1-18

DOI: 10.1016/j.jpubeco.2013.08.002

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