Tax Design, Information, and Elasticities: Evidence From the French Wealth Tax
Using exhaustive administrative wealth and income tax data, we study a French wealth tax reform that scaled back information disclosure requirements below a certain wealth threshold. We develop a dynamic bunching approach that permits estimating the average response to the reform, the share of compliers (bunchers) and the LATE. Reported wealth declines sharply in response to the reform and annual wealth growth rates are on average 20% lower among affected taxpayers. This decline appears due to increased evasion facilitated by the lower disclosure requirements. By contrast, the elasticities to tax rates estimated are very small and insignificant. Responses to disclosure requirements are ten times larger than behavioral responses to kinks in the tax rates. To offset the revenue losses induced by the simplified reporting regime, the government would need to increase the effective wealth tax rate paid by the bunchers by 22.5%. Together, these results illustrate the critical role of information disclosure policies in shaping taxpayers’ behavior and tax revenues.
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Copy CitationBertrand Garbinti, Jonathan Goupille-Lebret, Mathilde Muñoz, Stefanie Stantcheva, and Gabriel Zucman, "Tax Design, Information, and Elasticities: Evidence From the French Wealth Tax," NBER Working Paper 31333 (2023), https://doi.org/10.3386/w31333.Download Citation
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