Tax penalties on fluctuating incomes: estimates from longitudinal data

Daniel V. Gordon and Jean-Francois Wen
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Daniel V. Gordon: University of Calgary

International Tax and Public Finance, 2018, vol. 25, issue 2, No 6, 430-457

Abstract: Abstract Progressive personal income taxes can cause individuals with fluctuating incomes to pay more taxes over time than individuals with constant incomes of the same average value. The implicit tax penalty violates principles of equity and may harm efficiency by discouraging risk-taking activities, such as entrepreneurship. This paper uses longitudinal data to estimate the tax penalties in six panels of Canadian data from 1993 to 2010. The effects of various income averaging policies for mitigating tax penalties are then examined.

Keywords: Income tax; Income fluctuations; Progressivity (search for similar items in EconPapers)
JEL-codes: H23 H24 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10797-017-9456-1

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