Scandinavian Working Papers in Economics
Working Paper Series,
IFAU - Institute for Evaluation of Labour Market and Education Policy
No 2022:12: Earnings responses to even higher taxes
Dingquan Miao (), Håkan Selin () and Martin Söderström ()
Additional contact information
Dingquan Miao: Linnaeus University, Postal: Department of Economics and Statistics, Linnaeus University.,
Håkan Selin: IFAU - Institute for Evaluation of Labour Market and Education Policy, Postal: Institute for Evaluation of Labour Market and Education Policy, P O Box 513, SE-751 20 Uppsala, Sweden
Martin Söderström: IFAU - Institute for Evaluation of Labour Market and Education Policy, Postal: Institute for Evaluation of Labour Market and Education Policy, P O Box 513, SE-751 20 Uppsala, Sweden
Abstract: We exploit a recent Swedish tax reform, implying higher marginal tax rates for the top 5% of the earnings distribution, to learn about earnings responses in an economy where taxes already are high. Using a simple and graphical cross sectional method, we estimate earnings elasticities in the range 0.13-0.16. We interpret the response using a simulation model in which people face uncertain marginal tax rates due to earnings dynamics. The tax response is surprisingly sharp given the earnings variability at the top of the earnings distribution.
Keywords: Earnings supply; Income taxation
Language: English
50 pages, May 30, 2022
Full text files
wp-2022-12-earnings-...ven-higher-taxes.pdfFull text
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