Top 1 share and top marginal tax rate in 20059 4

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Unformatted text preview: Australia NZ France Japan Finland Switzerland Netherlands Sweden 6 Top 1% Income Share (%) 8 10 12 14 16 18 B. Top 1% Share and Top Marginal Tax Rate in 2005−9 4 Denmark 40 50 60 70 Top Marginal Tax Rate (%) 80 90 10 Change in Top 1% Income Share (points) 0 2 4 6 8 US Elasticity= .47 (.11) UK Ireland Portugal Norway Canada Italy Australia Australia Spain NZ Japan Sweden Denmark France Finland Germany Switzerland Netherlands −40 −30 −20 −10 Change in Top Marginal Tax Rate (points) 0 10 Change in Top Tax Rate and Top 1% Share, 1960-4 to 2005-9 TOP RATES AND TOP INCOMES EVIDENCE 1) Pre-tax Top income shares have increased significantly in some but not all countries [Atkinson-Piketty-Saez JEL’11] 2) Top tax rates have come down significantly in a number of countries since 1960s 3) Correlation between 1) and 2) is strong but not perfect: lower top tax rates are a necessary but not sufficient condition for surge in top incomes 22 ECONOMIC EFFECTS OF TAXING THE TOP 1% Strong empirical evidence that pre-tax top incomes are affected by top tax rates 3 potential scenarios with very different policy consequences 1) Supply-Side: Top earners work less and earn less when top tax rate increases ⇒ Top tax rates should not be too high 2) Tax Avoidance/Evasion: Top earners avoid/evade more when top tax rate increases ⇒ a) Eliminate loopholes, b) Then increase top tax rates 3) Rent-seeking: Top earners extract...
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This note was uploaded on 01/23/2014 for the course ECON 131 taught by Professor Karp during the Spring '07 term at University of California, Berkeley.

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