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Taxation and Top Incomes in Canada

Kevin Milligan, Michael Smart

NBER Working Paper No. 20489
Issued in September 2014
NBER Program(s):Public Economics

We estimate the elasticity of reported income with respect to tax rates for high earners using subnational variation across Canadian provinces. We argue this allows for better identification of tax elasticities than the existing literature. We find that elasticities of reported income at the provincial level are large for incomes in the top one percent, but small for lower earners. There are strong indications that the response happens both through earned and capital income. While our estimated elasticities are large, changes in tax rates cannot explain much of the overall long-run trend of higher income concentration in Canada.

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Document Object Identifier (DOI): 10.3386/w20489

Published:

  • Kevin Milligan & Michael Smart, 2015. "Taxation and top incomes in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 48(2), pages 655-681, May. citation courtesy of
  • Kevin Milligan & Michael Smart, 2015. "Taxation and top incomes in Canada," Canadian Journal of Economics/Revue canadienne d'économique, vol 48(2), pages 655-681.

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