NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Elasticity of Taxable Income with Respect to Marginal Tax Rates: A Critical Review

Emmanuel Saez, Joel B. Slemrod, Seth H. Giertz

NBER Working Paper No. 15012
Issued in May 2009
NBER Program(s):   PE

This paper critically surveys the large and growing literature estimating the elasticity of taxable income with respect to marginal tax rates (ETI) using tax return data. First, we provide a theoretical framework showing under what assumptions this elasticity can be used as a sufficient statistic for efficiency and optimal tax analysis. We discuss what other parameters should be estimated when the elasticity is not a sufficient statistic. Second, we discuss conceptually the key issues that arise in the empirical estimation of the elasticity of taxable income using the example of the 1993 top individual income tax rate increase in the United States to illustrate those issues. Third, we provide a critical discussion of most of the taxable income elasticities studies to date, both in the United States and abroad, in light of the theoretical and empirical framework we laid out. Finally, we discuss avenues for future research.

download in pdf format
   (490 K)

email paper

This paper is available as PDF (490 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w15012

Published: Emmanuel Saez & Joel Slemrod & Seth H. Giertz, 2012. "The Elasticity of Taxable Income with Respect to Marginal Tax Rates: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 50(1), pages 3-50, March. citation courtesy of

Users who downloaded this paper also downloaded these:
Piketty, Saez, and Stantcheva w17616 Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities
Saez w10273 Reported Incomes and Marginal Tax Rates, 1960-2000: Evidence and Policy Implications
Gruber and Saez w7512 The Elasticity of Taxable Income: Evidence and Implications
Feldstein w5055 Tax Avoidance and the Deadweight Loss of the Income Tax
Feldstein w4496 The Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the1986 Tax Reform Act
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us