Taxpayer responsiveness to marginal tax rates

Presented by ANU College of Asia & the Pacific

Utilizing the universe of taxpayer records from 2000 to 2014, we examine taxpayers’ responsiveness to marginal tax rates in Australia. Unlike studies from other countries, we find sharp bunching at all kink points in the Australian tax system. Elasticities of taxable income range from effectively zero for wage earners to around 0.26 for self-employed tax-filers. We find substantial heterogeneity in responses to changes in marginal tax rates across a range of sub-groups, with higher elasticities for married females, females with children and younger tax-filers. Elasticities appear to be decreasing over time.

Professor Breunig is the Director of the Tax and Transfer Policy Institute at Crawford School of Public Policy. He is one of Australia’s leading Public Policy Economists and has published in over 50 international academic journals in economics and public policy. Professor Breunig’s research agenda has led to many partnerships with government organizations in Australia and overseas. He works regularly with the Australian Treasury, the Department of Employment, the Department of Industry, the Department of Communication and the Arts, the Productivity Commission, the Australian Bureau of Statistics as well as many other agencies. He has also been a consultant to the private sector on marketing, mergers, bank competition and customer loyalty programs.

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