Tax Bunching, Income Shifting and Self-employment

Publikation: Working paperForskning

This paper proposes a dynamic extension to Saez (2010) bunching formula that allows us to distinguish bunching based on real responses and income shifting. We provide direct evidence of income shifting and pronounced bunching in taxable income for the case of Danish self-employed. If income shifting was neglected in this case, we would conclude that taxable incomes were highly sensitive to changes in marginal tax rates. We show, however, that more than half of the observed bunching in taxable income for the self-employed is driven by intertemporal income shifting, implying a structural elasticity in the range of 0.14-0.20.
OriginalsprogEngelsk
UdgiverEconomic Policy Research Unit. Department of Economics, University of Copenhagen
Antal sider38
StatusUdgivet - 2012

Bibliografisk note

JEL-Classification: H20, J20.

ID: 38557200