The Elasticity of Taxable Income with Respect to Marginal Tax Rates: A Critical Review

Emmanuel Saez, Joel Slemrod and Seth Giertz

No 15012, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper critically surveys the large and growing literature estimating the elasticity of taxable income with respect to marginal tax rates (ETI) using tax return data. First, we provide a theoretical framework showing under what assumptions this elasticity can be used as a sufficient statistic for efficiency and optimal tax analysis. We discuss what other parameters should be estimated when the elasticity is not a sufficient statistic. Second, we discuss conceptually the key issues that arise in the empirical estimation of the elasticity of taxable income using the example of the 1993 top individual income tax rate increase in the United States to illustrate those issues. Third, we provide a critical discussion of most of the taxable income elasticities studies to date, both in the United States and abroad, in light of the theoretical and empirical framework we laid out. Finally, we discuss avenues for future research.

JEL-codes: H24 H31 (search for similar items in EconPapers)
Date: 2009-05
New Economics Papers: this item is included in nep-pbe and nep-pub
Note: PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (101)

Published as Emmanuel Saez & Joel Slemrod & Seth H. Giertz, 2012. "The Elasticity of Taxable Income with Respect to Marginal Tax Rates: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 50(1), pages 3-50, March.

Downloads: (external link)
http://www.nber.org/papers/w15012.pdf (application/pdf)

Related works:
Journal Article: The Elasticity of Taxable Income with Respect to Marginal Tax Rates: A Critical Review (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:15012

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w15012

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().