Taxation and Top Incomes in Canada

39 Pages Posted: 15 Sep 2014

See all articles by Kevin S. Milligan

Kevin S. Milligan

University of British Columbia (UBC) - Department of Economics; National Bureau of Economic Research (NBER)

Michael Smart

University of Toronto - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

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Date Written: September 2014

Abstract

We estimate the elasticity of reported income with respect to tax rates for high earners using subnational variation across Canadian provinces. We argue this allows for better identification of tax elasticities than the existing literature. We find that elasticities of reported income at the provincial level are large for incomes in the top one percent, but small for lower earners. There are strong indications that the response happens both through earned and capital income. While our estimated elasticities are large, changes in tax rates cannot explain much of the overall long-run trend of higher income concentration in Canada.

Suggested Citation

Milligan, Kevin S. and Smart, Michael, Taxation and Top Incomes in Canada (September 2014). NBER Working Paper No. w20489, Available at SSRN: https://ssrn.com/abstract=2496245

Kevin S. Milligan (Contact Author)

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Michael Smart

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