Income Elasticity and Inequality

Interdisciplinary Journal of Economics and Business Law, 2016, Vol. 5, Issue 1, pp. 34-44

11 Pages Posted: 17 Jun 2015 Last revised: 27 Jan 2016

See all articles by Bret Bogenschneider

Bret Bogenschneider

University of Surrey - School of Law

Ruth Heilmeier

Cologne Graduate School in Management

Date Written: 2015

Abstract

Prior empirical work on the elasticity of taxable income indicated top earners vary earnings depending on changes in tax rates reflecting a positive elasticity of taxable income. This paper re-calculated income elasticity also taking into account concurrent changes in income inequality. With this adjustment, the income elasticity of high-income taxpayers was confirmed as positive, but the income elasticity of higher income-taxpayers was found to be neutral. This indicates the taxable income of the higher earners is not sensitive to changes in tax rates because of the relatively low portion of earned income for these taxpayers.

Suggested Citation

Bogenschneider, Bret and Heilmeier, Ruth, Income Elasticity and Inequality (2015). Interdisciplinary Journal of Economics and Business Law, 2016, Vol. 5, Issue 1, pp. 34-44. Available at SSRN: https://ssrn.com/abstract=2619530

Bret Bogenschneider (Contact Author)

University of Surrey - School of Law ( email )

United Kingdom

Ruth Heilmeier

Cologne Graduate School in Management ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

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