Bunching to Maximize Tax Credits: Evidence from Kinks in the U.S. Tax Schedule
36 Pages Posted: 23 Jan 2016 Last revised: 20 Jul 2019
Date Written: July 2019
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
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