Using t the Alternative Minimu mum T Tax t to Estim imate t - - PowerPoint PPT Presentation

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Mar 20, 2024 167 likes •215 views

Using t the Alternative Minimu mum T Tax t to Estim imate t the E Elastic icit ity of f Taxable le Income for Hi Higher-Incom ome e Taxpayer ers Ali Abbas Summary Uses effective tax schedule from the interaction of the AMT

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Using t the Alternative Minimu mum T Tax t to Estim imate t the E Elastic icit ity of f Taxable le Income for Hi Higher-Incom

e Taxpayer ers

Ali Abbas

SLIDE 2

Summary

Uses effective tax schedule from the interaction of the AMT with the

regular income tax schedule for higher-income taxpayers

estimate and compare elasticities via two methods: the traditional

bunching estimator, and a method using sub-distributions as control groups

low elasticity estimates obtained for higher income taxpayers in the United

States using the traditional bunching estimator is a result of excluding the impact of another salient federal income tax instrument, which interacts with the regular tax schedule at higher income levels and confounds such an analysis.

individual income tax return data from 1993-2011
find an elasticity estimate of 0.08 at the effective kink
higher elasticities than Saez (2010) for higher-income taxpayers

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Contributions

Exploits the intersection kink is more robust to endogeneity concerns
Larger jump in tax rate from 28 percent to 39.6 percent at the

intersection kink

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Comments

Isoelastic utility
No Income effects
Small estimated elasticities for high-income
Compare with previous literature
Implications for optimal tax rates