The elasticity of taxable income of high earners: evidence from Hungary

The optimal top marginal tax rate: Application to Hungary

“…The present calculation of the optimal top marginal tax rate uses this estimate (e = 0.2) as a benchmark but the formula is evaluated at somewhat lower and higher values as well. The income effect estimated by Kiss and Mosberger (2011) is relatively large in magnitude, but not statistically significant in the main specification.…”

“…The second study of the taxable-income elasticity for Hungary was conducted by Kiss and Mosberger (2011). They use the introduction of an extraordinary tax on high-income individuals in 2007 as their policy episode, thus they focus on the group of individuals most relevant for the present purposes (their main specification includes individuals earning HUF 5 to 8 million in 2005 or about EUR 17 to 27 thousand at 2013 conversion rates).…”

“…Even though the theoretical analysis suggests that at high incomes the marginal tax rate should be increasing, individuals below the pension contribution ceiling were facing a higher marginal tax rate than those above the ceiling in recent years (the marginal tax rate schedules for incomes above HUF 3 million [or about EUR 10,000] for selected years between 2005 and 2013 are shown in Figure A1 of the Appendix). Very high marginal tax rates are justifiable at income levels where the taxable-income elasticity is thought to be close to zero (as it might be the case around the average wage), but this is not the case, according to the estimations of Kiss and Mosberger (2011), in the income range just below the pension contribution ceiling.…”

“…The simulations were conducted in the microsimulation model described by Benczúr et al (2011Benczúr et al ( , 2012. The model takes into account the behavioural responses to taxation by incorporating the taxable-income elasticity of 0.2 estimated by Kiss and Mosberger (2011), and it also takes into account generalequilibrium effects through a simple neo-classical macroeconomic model. This means that if individuals change their labour supply as a response to changes in the tax system, the general-equilibrium model calculates how this affects wages and the stock of capital.…”

The Elasticity of Taxable Income: A Meta-Regression Analysis

“…Study N in % Aarbu and Thoresen (2001) 8 0.56 Arrazola et al (2014) 8 0.56 Arrazola-Vacas et al (2015) 26 1.83 Auten and Carroll (1999) 20 1.41 Auten et al (2008) 10 0.70 Auten and Joulfaian (2009) 24 1.69 Auten and Kawano (2014) 10 0.70 Bakos et al (2010) 21 1.48 Blomquist and Selin (2010) 10 0.70 Burns and Ziliak (2017) 64 4.51 Carey et al (2015) 6 0.42 Carroll (1998) 12 0.85 Chetty et al (2011) 6 0.42 Doerrenberg et al (2017) 16 1.13 Ericson et al (2015) 5 0.35 Gelber (2014) (2013) 54 3.80 Kiss and Mosberger (2014) 15 1.06 Kleven and Schultz (2014) 114 8.03 Kopczuk (2005) 91 6.41 Kopczuk (2015) 30 2.11 Kumar and Liang (2015) 10 0.70 Lehmann et al (2013) …”