Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/205497
Authors: 
Creedy, John
Gemmell, Norman
Year of Publication: 
2002
Series/Report no.: 
New Zealand Treasury Working Paper No. 02/22
Publisher: 
New Zealand Government, The Treasury, Wellington
Abstract: 
It is important for the design of tax policy to be able to measure reliably the income elasticity of tax revenue. This gives the extent to which tax revenues change as a result of a change in earnings. Analytical expressions for income tax revenue elasticities treat earnings as exogenous, so that they do not accommodate the endogenous response of labour supply to the income tax system. This paper shows how these expression can be adapted to allow for endogenous labour supply. It identifies how far, and in what circumstances, labour supply effects are quantitatively important for revenue responsiveness estimates, both for individual taxpayers and in aggregate. It is shown that even a relatively simple tax-benefit structure can produce labour supply responses which considerably alter tax revenue elasticity calculations. It is shown that , even with modest leisure preferences, tax-wage elasticities are significantly higher that tax-income elasticities.
Subjects: 
Income Taxation
Revenue
Elasticity
Labour Supply
JEL: 
H24
H31
J22
Creative Commons License: 
https://creativecommons.org/licenses/by/4.0/
Document Type: 
Working Paper

Files in This Item:
File
Size
438.15 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.