Bunching to Maximize Tax Credits: Evidence from Kinks in the U.S. Tax Schedule

Posted: 23 Jan 2016

See all articles by Jacob Mortenson

Jacob Mortenson

Joint Committee on Taxation, US Congress

Andrew Whitten

U.S. Department of the Treasury - Office of Tax Analysis (OTA)

Date Written: July 2019

Abstract

We explore bunching at U.S. income tax kinks using a panel of 258 million tax returns from 1996 to 2014. We find bunching at seven kinks, with nearly all bunching occurring at kinks maximizing tax credits. In our sample period, the total number of bunchers increased at an 11 percent annualized growth rate,from 134,300 in 1996 to 866,600 in 2014. Approximately two-thirds of these bunchers locate at the unique point that maximizes refunds. Some taxpayers repeatedly bunch at this point, even in consecutive years when different tax kinks are refund maximizing.

The online appendix for this paper can be found at: https://papers.ssrn.com/abstract=3420910

Keywords: bunching; tax credits; tax evasion; public finance; self-employment

JEL Classification: H23, H24, H26, H31, J22

Suggested Citation

Mortenson, Jacob and Whitten, Andrew, Bunching to Maximize Tax Credits: Evidence from Kinks in the U.S. Tax Schedule (July 2019). Available at SSRN: https://ssrn.com/abstract=2719859 or http://dx.doi.org/10.2139/ssrn.2719859

Jacob Mortenson

Joint Committee on Taxation, US Congress ( email )

502 Ford House Office Building
Washington, DC 20515
United States

HOME PAGE: http://www.jacobmortenson.com

Andrew Whitten (Contact Author)

U.S. Department of the Treasury - Office of Tax Analysis (OTA) ( email )

1500 Pennsylvania Ave., N.W.
Washington, DC 20220
United States

HOME PAGE: http://andrewwhitten.com

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