Monday, May 2, 2011

Taxation and Tax Avoidance

Corrections offers a nice figure from Emanuel Saez's "Do Taxpayers Bunch at Kink Points?" (American Economic Journal: Economic Policy 2010) (gated) (ungated).   The figure is a histogram of reported income by tax filers (married and single) in $800 categories from NBER's public use tax data.  Note the dramatic bunching for single tax filers around the first increase in marginal tax rates (click to enlarge).  See paper for table notes.

Rule of thumb: distortionary taxation is first order.  Everything else is second order. 

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