Are Elasticities of Taxable Income Rising?

23 Pages Posted: 1 Aug 2018

See all articles by Alexander Klemm

Alexander Klemm

International Monetary Fund (IMF)

Li Liu

International Monetary Fund (IMF)

Victor Mylonas

International Monetary Fund (IMF)

Philippe Wingender

International Monetary Fund (IMF) - Fiscal Affairs Department

Date Written: June 2018

Abstract

This paper assesses a possible explanation for the global downward trend in top personal income tax rates over the last decades: globalization and the related tax evasion and avoidance opportunities could have raised elasticities of taxable income, which would imply lower optimal tax rates. The paper estimates elasticities of taxable income for top income earners using a large sample of economies and years with a common method, allowing an analysis of trends in such elasticities. The paper finds that elasticities do not appear to exhibit any clear pattern over the years. The downward trend in tax rates must have other possible explanations, which are briefly discussed.

Keywords: Personal income taxes, Tax rates, Tax elasticity, Progressive taxation, Optimal taxation, Globalization, Optimal tax; Elasticity of taxable income; Tax Progressivity; Progressive Taxation, Optimal tax, Elasticity of taxable income, Tax Progressivity, Progressive Taxation, Incidence

JEL Classification: H21, H22, H24

Suggested Citation

Klemm, Alexander and Liu, Li and Mylonas, Victor and Wingender, Philippe, Are Elasticities of Taxable Income Rising? (June 2018). IMF Working Paper No. 18/132. Available at SSRN: https://ssrn.com/abstract=3221216

Alexander Klemm (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Li Liu

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Victor Mylonas

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Philippe Wingender

International Monetary Fund (IMF) - Fiscal Affairs Department ( email )

700 19th Street, NW
Washington, DC 20431
United States
202-623-9831 (Phone)
202-623-4199 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
30
Abstract Views
128
PlumX Metrics