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Income Inequality and Income Taxation: Do Tax Rate Cuts Increase Top Incomes?
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
2016 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

A very long-standing but still inconclusive dilemma is: How do taxes aectincome distribution? This study estimates the impact of changes of tax rates on the top tail of pre-tax income distribution. Historical evidence suggests that a larger elasticity is a modern phenomenon, reflecting the erosion of progressivity of the personal income tax since the 1980s.The behavioral response to tax changes is noteworthy for the shares above the top percentile, whereas the bottom half of the top decile seems to be unaected. The elasticity diers using the average tax rate rather than a more common measure of taxation like the top marginal tax rates. This suggests that the behavioral response is likely to depend on features of the tax system.The tax reforms implemented in Australia, New Zealand, and Norway in the late1980s and early 1990s are analyzed using the novel synthetic control methodology. Results show robust eect in the top percentile for Australia and Norway, in the top vintile for New Zealand.

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URN: urn:nbn:se:uu:diva-296824OAI: oai:DiVA.org:uu-296824DiVA: diva2:939946
Available from: 2016-06-20 Created: 2016-06-20 Last updated: 2016-06-20Bibliographically approved

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