Tax Incentives and Borrowing

Sule Alan; Søren Leth-Petersen; Anders Munk-Nielsen

doi:10.1016/j.econlet.2016.06.014

Tax Incentives and Borrowing

Sule Alan, Søren Leth-Petersen, Anders Munk-Nielsen

Abstract

We estimate the effect of the Danish 1987 tax reform, which reduced the tax rate applied to interest deductions from 73% to 50% for households with high incomes, but less for households with middle or low incomes. Using high quality panel data we find that households responded to the reduced tax subsidy by lowering interest payments and we find that the responsiveness to the tax subsidy varies by the initial level of interest payments.

Original language	English
Journal	Economics Letters
Volume	145
Pages (from-to)	162–164
ISSN	0165-1765
DOIs	https://doi.org/10.1016/j.econlet.2016.06.014
Publication status	Published - 1 Aug 2016

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title = "Tax Incentives and Borrowing",

abstract = "We estimate the effect of the Danish 1987 tax reform, which reduced the tax rate applied to interest deductions from 73% to 50% for households with high incomes, but less for households with middle or low incomes. Using high quality panel data we find that households responded to the reduced tax subsidy by lowering interest payments and we find that the responsiveness to the tax subsidy varies by the initial level of interest payments.",

author = "Sule Alan and S{\o}ren Leth-Petersen and Anders Munk-Nielsen",

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AU - Munk-Nielsen, Anders

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N2 - We estimate the effect of the Danish 1987 tax reform, which reduced the tax rate applied to interest deductions from 73% to 50% for households with high incomes, but less for households with middle or low incomes. Using high quality panel data we find that households responded to the reduced tax subsidy by lowering interest payments and we find that the responsiveness to the tax subsidy varies by the initial level of interest payments.

AB - We estimate the effect of the Danish 1987 tax reform, which reduced the tax rate applied to interest deductions from 73% to 50% for households with high incomes, but less for households with middle or low incomes. Using high quality panel data we find that households responded to the reduced tax subsidy by lowering interest payments and we find that the responsiveness to the tax subsidy varies by the initial level of interest payments.

U2 - 10.1016/j.econlet.2016.06.014

DO - 10.1016/j.econlet.2016.06.014

M3 - Journal article

SN - 0165-1765

VL - 145

SP - 162

EP - 164

JO - Economics Letters

JF - Economics Letters

ER -

Tax Incentives and Borrowing

Abstract

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