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Title:The rich demystified: A reply to Bach, Corneo, and Steiner (2008) PDF Logo
Authors:Jacob, Martin
Niemann, Rainer
Weiss, Martin
Issue Date:2008
Series/Report no.:Arqus-Diskussionsbeiträge zur quantitativen Steuerlehre 58
Abstract:The contribution Bach, Corneo and Steiner (2008) has argued that "the rich" do not pay taxes adequately in relation to their income, finding, for instance, an effective tax rate of only 38.1% for the 0.001% fractile of German income taxpayers in 2001. This result contrasts sharply with the legislated top marginal income tax rate of 48.5%. We subject the results contained in Bach, Corneo and Steiner (2008) to a rigorous analysis: We find major flaws and inconsistencies with regard to methodology, i.e. the omission of corporate taxes and inter-temporal aspects of taxation. Restating basic rules for the measurement of effective tax rates, we provide values for what we term the "comprehensive nominal tax rate" (CNTR) and show that the headline result in Bach, Corneo and Steiner (2008) of 38.1% is underestimated by over 12 percentage points. As an important distributional result, the CNTR increases with increasing taxable income.
Subjects:Top Incomes
Income Taxation
Taxing the Rich
Comprehensive Tax Burden
JEL:D31
H00
H24
H25
Document Type:Working Paper
Appears in Collections:arqus Diskussionsbeiträge zur Quantitativen Steuerlehre

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