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NATIONAL BUREAU OF ECONOMIC RESEARCH
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Jose L. Montiel Olea

Columbia University
Department of Economics
Office 1020
1022 International Affairs Building
New York, NY 10027

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Institutional Affiliation: Columbia University

NBER Working Papers and Publications

June 2013Marginal Tax Rates and Income: New Time Series Evidence
with Karel Mertens: w19171
Using new narrative measures of exogenous variation in marginal tax rates associated with postwar tax reforms in the US, this study estimates short run tax elasticities of reported income of around 1.2 based on time series from 1946 to 2012. Elasticities are larger in the top 1% of the income distribution but are also positive and statistically significant for other income groups. Previous time series studies of tax returns data have found little evidence for income responses to taxes outside the top of the income distribution. The different results in this study arise because of additional efforts to account for dynamics, expectations and especially the endogeneity of tax policy decisions. Marginal rate cuts lead to increases in real GDP and declines in unemployment. This study also prese...

Published: Karel Mertens & José Luis Montiel Olea, 2018. "Marginal Tax Rates and Income: New Time Series Evidence*," The Quarterly Journal of Economics, vol 133(4), pages 1803-1884. citation courtesy of

 
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