THE EFFECT OF RECENT TAX CHANGES ON TAXABLE INCOME: CORRECTION AND UPDATE

Bradley Heim and Jacob Mortenson

Journal of Policy Analysis and Management, 2018, vol. 37, issue 3, 686-694

Abstract: This article is a Commentary on Bradley T. Heim (), The effect of recent tax changes on taxable income: Evidence from a new panel of tax returns,†Journal of Policy Analysis and Management, 28, 147–163. doi:10.1002/pam.20406. This note provides corrected estimates of the elasticity of taxable income to the net of tax share using a panel of tax returns that follows a random sample of taxpayers from 1999 to 2005, spanning the EGTRRA 2001 and JGTRRA 2003 tax changes. Two errors were corrected: the specification of income splines, and the subtraction of capital gains income from the dependent variable. Though the original results are largely robust to the first change, they are not robust to the second. The corrected estimates suggest that the elasticity of taxable income to the current year's net of tax share is small and statistically insignificantly different from zero.

Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jpamgt:v:37:y:2018:i:3:p:686-694

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