Taxation and Top Incomes in Canada
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.
We thank seminar participants at Carleton University, Exeter University and University of Ottawa for comments on this project. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
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. citation courtesy of