Bunching to Maximize Tax Credits: Evidence from Kinks in the U.S. Tax Schedule
46 Pages Posted: 23 Jan 2016 Last revised: 11 Dec 2018
Date Written: December 1, 2018
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 a 12.1% annualized growth rate, from 107,300 in 1996 to 833,600 in 2014. Approximately 70% 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.
Keywords: bunching; tax credits; tax evasion; public finance; self-employment
JEL Classification: H23, H24, H26, H31, J22
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