Working Paper No. 1161

Tax Progressivity and Top Incomes: Evidence from Tax Reforms

Published: March 27, 2017Pages: 59Keywords: Income inequality; Tax policyJEL-codes: H21; H24; H26

Tax Progressivity and Top Incomes: Evidence from Tax Reforms Enrico Rubolino and Daniel Waldenström


We study the link between tax progressivity and top income shares. Using variation from large-scale Western tax reforms in the 1980s and 1990s and the novel synthetic control method, we find large and lasting boosting impacts on top income shares from the progressivity reductions. Effects are largest in the very top groups while earners in the bottom half of the top decile were almost unaffected by the reforms. Cuts in top marginal tax rates account for most of this outcome whereas reduced overall progressivity contributed less. Searching for mechanisms, real income responses as measured by growth in aggregate GDP per capita, registered patents and tax revenues were unaffected by the reforms. By contrast, tax avoidance behavior related to the management of capital incomes in the very income top appears to lie behind the observed effects.

Daniel Waldenström

Contact

Ph: +46 8 665 4584
Mob: +46 70 4916082
daniel.waldenstrom@if...

Interdisciplinary European Studies

The European Union and the Return of the Nation State

9783030350048_200x_the-european-union-and-the-return-of-the-nation-state.jpg

This book explores the complex and ever-changing relationship between the European Union and its member states. The recent surge in tension in this relationship has been prompted by the actions of some member state governments as they question fundamental EU values and principles and refuse to implement common decisions seemingly on the basis of narrowly defined national interests.

About the book

Events

Seminars organized by IFN

 

To present ongoing research informal brown-bag seminars are held on Mondays at 11:30 am. This is an opportunity for IFN researchers to test ideas and results.

Academically oriented seminars are most of the time held on Wednesdays at 10 am. At these events researchers from IFN and other institutions present their research.

In addition, IFN organizes seminars open to the public. Topics for these are derived from the IFN research.

Research Institute of Industrial Economics, Grevgatan 34 - 2 fl, Box 55665, SE-102 15 Stockholm, Sweden | Phone: +46-(0)8-665 45 00 | info@ifn.se