NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Do Taxes Matter? Lessons From the 1980s

Joel Slemrod

NBER Working Paper No. 4008
Issued in March 1992
NBER Program(s):   PE

The response of the economy to two major -- although in important respects offsetting -- tax reforms has been much smaller than ardent supply-side revolutionaries expected, thus suggesting that a reassessment of the grounds for revolt is in order. This paper offers such a reassessment by first discussing how the evidence from the tax reforms of 1981 and 1986 reflects on our understanding of the response to taxation -- with particular reference to savings and capital gains realizations. I then reconstruct a 1992 view about how taxes affect behavior. A unifying theme is that the tax system does much more than alter the relative prices of real variables -- it also provides incentives to misreport income, restructure financial claims, time transactions, change the legal form of organization, and so on. For this reason, observed low tax elasticities of real variables may be due to either low elasticities of substitution or the fact that tax policy changes opportunity sets in complex ways. Disentangling these explanations requires an emphasis on the transaction-based nature of the tax system and the administration and enforcement of tax laws.

download in pdf format
   (153 K)

download in djvu format
   (103 K)

email paper

This paper is available as PDF (153 K) or DjVu (103 K) (Download viewer) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w4008

Published: American Economic Review, Volume 82, Number 2, pp. 250-6, May 1992 citation courtesy of

Users who downloaded this paper also downloaded these:
Feldstein w13745 Effects of Taxes on Economic Behavior
Slemrod w6584 The Economics of Taxing the Rich
Slemrod w6582 A General Model of the Behavioral Response to Taxation
Feenberg and Poterba Income Inequality and the Incomes of Very High-Income Taxpayers: Evidence from Tax Returns
Hanlon and Shevlin Book-Tax Conformity for Corporate Income: An Introduction to the Issues
 
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