Tax Reforms and Intertemporal Shifting of Wage Income: Evidence from Danish Monthly Payroll Records

TY - JOUR

T1 - Tax Reforms and Intertemporal Shifting of Wage Income

T2 - Evidence from Danish Monthly Payroll Records

AU - Kreiner, Claus Thustrup

AU - Leth-Petersen, Søren

AU - Skov, Peer Ebbesen

N1 - JEL Classification: H24, H31, J22, J31

PY - 2016/8/1

Y1 - 2016/8/1

N2 - This paper uses monthly payroll records for all Danish employees to identify widespread intertemporal shifting of labor income in response to a tax reform that significantly reduced the marginal tax rates for one- fourth of all employees. When ignoring shifting, the estimate of the overall elasticity of taxable income equals 0.1, and the elasticity is increasing with earnings. When removing the shifting component, the elasticity is close to zero at all earnings levels. The evidence also indicates that tax salience, liquidity constraints and firm willingness to cooperate in shifting are important factors in explaining shifting behavior.

AB - This paper uses monthly payroll records for all Danish employees to identify widespread intertemporal shifting of labor income in response to a tax reform that significantly reduced the marginal tax rates for one- fourth of all employees. When ignoring shifting, the estimate of the overall elasticity of taxable income equals 0.1, and the elasticity is increasing with earnings. When removing the shifting component, the elasticity is close to zero at all earnings levels. The evidence also indicates that tax salience, liquidity constraints and firm willingness to cooperate in shifting are important factors in explaining shifting behavior.

KW - Faculty of Social Sciences

KW - H24

KW - H31

KW - J22

KW - J31

U2 - 10.1257/pol.20140233

DO - 10.1257/pol.20140233

M3 - Journal article

SN - 1945-7731

VL - 8

SP - 233

EP - 257

JO - American Economic Journal: Economic Policy

JF - American Economic Journal: Economic Policy

IS - 3

ER -