The Effect of Changes in the Tax Structure on the Reported Income of High-Income Individuals

Hernan Acuna and Randall Holcombe
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Hernan Acuna: Planning Ministry of Chile, Santiago, Chile

Public Finance Review, 2010, vol. 38, issue 3, 321-345

Abstract: Tax incidence theory shows how taxes initially placed on one group can be shifted and ultimately borne by others. This paper shows that income of high-income taxpayers is affected both by the rates they face and by the rates faced by non-high-income taxpayers. The income of high-income taxpayers rises when they face lower tax rates, but also rises in response to lower tax rates imposed on non-high-income taxpayers. While high-income responses to own statutory tax changes may be explained—at least partially—by their making a ‘‘smart use of the tax code,’’ high-income responses to tax changes on non-high income individuals indicate the presence of structural effects of tax changes.

Keywords: tax shifting; income taxation; progressive taxation (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:38:y:2010:i:3:p:321-345

DOI: 10.1177/1091142109358705

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