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Title:How successful is the dual income tax?: evidence from the Finnish tax reform of 1993 PDF Logo
Authors:Pirttilä, Jukka
Selin, Håkan
Issue Date:2006
Series/Report no.:CESifo working paper 1875
Abstract:Dual income tax systems have become increasingly popular; yet, relatively little is known about the consequences of implementing such tax systems. This paper uses a representative panel of taxpayers from the 1993 Finnish tax reform to measure how overall taxable income and the relative shares of capital income and labour income reacted to the reform. The Finnish tax reform appears to be particularly suitable for analysing the effect of separating labour and capital income tax bases. The reform radically reduced the marginal tax rates on capital income to some, but not all, taxpayers, while the taxation of labour income was not reformed at the same time. We find that the reform led to a small positive impact on overall taxable income, but part of the positive response was probably offset by income shifting among the self-employed.
JEL:C21
H21
H31
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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