American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Do Taxpayers Bunch at Kink Points?
American Economic Journal: Economic Policy
vol. 2,
no. 3, August 2010
(pp. 180–212)
Abstract
This paper uses tax return data to analyze bunching at the kink points of the US income tax schedule. We estimate the compensated elasticity of reported income with respect to (one minus) the marginal tax rate using bunching evidence. We find clear evidence of bunching around the first kink point of the Earned Income Tax Credit but concentrated solely among the self-employed. A simple tax evasion model can account for those results. We find evidence of bunching at the threshold of the first income tax bracket where tax liability starts but no evidence of bunching at any other kink point. (JEL H23, H24, H26)Citation
Saez, Emmanuel. 2010. "Do Taxpayers Bunch at Kink Points?" American Economic Journal: Economic Policy 2 (3): 180–212. DOI: 10.1257/pol.2.3.180Additional Materials
JEL Classification
- H23 Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- H26 Tax Evasion