This paper examines the elasticity of tax revenue with respect to a marginal rate change, at both the individual and aggregate level. The roles of the elasticity of taxable income (the behavioural effect on taxable income of a tax rise) and the revenue elasticity (the structural effect on...

This paper examines estimation of the elasticity of taxable income using instrumental variable regression methods. It is argued that the standard instrument for the net-of-tax rate - the rate that would be applicable post-reform but with unchanged income levels - is unsatisfactory in contexts...

This paper examines estimation of the elasticity of taxable income using instrumental variable regression methods. It is argued that the ‘standard instrument' for the net-of-tax rate − the rate that would be applicable post-reform but with unchanged income levels − is unsatisfactory in...

The empirical literature on the elasticity of taxable income (ETI) sometimes questions whether estimated values are consistent with being on the revenueincreasing section of the Laffer curve, usually in the context of a single rate tax system or for top marginal rates. This paper develops...

A recent review of empirical estimates of the elasticity of taxable income (ETI) concluded that ‘the US marginal top rate is far from the top of the Laffer curve' (Saez et al, 2012, p.42). This paper provides a detailed examination of the analysis underlying this conclusion, and considers...