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Working paper
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Individuals' responsiveness to marginal tax rates: evidence from bunching in the Australian personal income tax

Arezou Zaresani
Publisher
Taxation Income tax Tax rates Australia
Description

In this paper, the authors examine individuals’ responsiveness to marginal tax rates using the universe of Australian taxpayer records from 2000 to 2018. Unlike studies from other countries, they find sharp bunching at all kink points. The estimated Elasticities of Taxable Income (ETI) range from effectively zero for wage earners to 0.23 for self-employed individuals. There is substantial heterogeneity in responses to changes in marginal tax rates across subgroups, with higher elasticities for married females, females with children, younger individuals, and those with greater opportunity to shift income within the household. The findings suggest that individuals’ responsiveness is a function of the marginal tax rates and the tax system's structure and administration.

Publication Details
License type:
All Rights Reserved
Access Rights Type:
open
Series:
TTPI Working Paper 11/2023