The Elasticity of Reported Income

Forskningsenhed: EPRU

Behavioral responses to taxation are crucial to decisions about tax policy reform. Many public policies involve a trade-off between distributional equity and allocational efficiency. Under quite general conditions, the efficiency effect of a tax reform is given by the impact of changed behavior on government revenue (e.g. Kleven and Kreiner, 2005). Hence, all those behavioral responses which affect government revenue – in other words, all those kinds of behavior which are taxed – are important to the efficiency of policy reforms.

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You can read the Journal article Estimating Taxable Income Responses Using Danish Tax Reforms, American Economic Journal: Economic Policy 2014, 6(4): 271–301, Henrik Jacobsen Kleven & Esben Anton Schultz here