This paper produces regression estimates of the elasticity of taxable income in New Zealand using two new instruments applied to a substantial tax reform ‘experiment’. Instrumental variable methods are required to deal with endogeneity of the tax rate and taxable income in a non‐linear tax...

This paper reports estimates of the elasticity of taxable income with respect to the net-of-tax rate for New Zealand taxpayers. The elasticity of taxable income was estimated to be substantially higher for the highest income groups. Generally it was higher for men than for women. Changes in the...