Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/327115 
Year of Publication: 
2025
Series/Report no.: 
Freiburger Diskussionspapiere zur Ordnungsökonomik No. 25/9
Publisher: 
Albert-Ludwigs-Universität Freiburg, Institut für Allgemeine Wirtschaftsforschung, Abteilung für Wirtschaftspolitik und Ordnungsökonomik, Freiburg i. Br.
Abstract: 
We study how individuals adjust their labor supply in response to tax reforms that alter income tax progressivity. In an online experiment with 522 participants, we compare responses to reforms that replace a progressive tax system with a flat tax and vice versa. We find asymmetric effects: labor supply increases when a progressive regime is replaced by a flat tax system, but does not decline when progressivity is introduced. This increase in labor provision occurs only when the reform lowers the marginal tax rate, not when it raises it. Our results suggest that labor supply responses to tax reforms are nuanced and path-dependent: reforms change behavior when they ease tax burdens for individuals who were previously discouraged from working more due to progressive thresholds.
Subjects: 
Tax System Design
Tax Reform
Notches
Labor Supply
Online Experiment
JEL: 
J20
J22
H24
H30
C91
Document Type: 
Working Paper

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