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Behavioural responses to a wealth tax

Advani, Arun and Tarrant, Hannah (2021) Behavioural responses to a wealth tax. Fiscal Studies, 42 (3-4). 509 - 537. ISSN 0143-5671

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Identification Number: 10.1111/1475-5890.12283

Abstract

In this paper, we review the existing empirical evidence on how individuals respond to the incentives created by a net wealth tax. Variation in the overall magnitude of behavioural responses is substantial: estimates of the elasticity of taxable wealth vary by a factor of 800. We explore three key reasons for this variation: tax design, context and methodology. We then discuss what is known about the importance of individual margins of response and how these interact with policy choices. Finally, we use our analysis to systematically narrow down and reconcile the range of elasticity estimates. We argue that a well-designed wealth tax would reduce the tax base by 7–17 per cent if levied at a tax rate of 1 per cent.

Item Type: Article
Official URL: https://onlinelibrary.wiley.com/journal/14755890
Additional Information: © 2021 The Authors
Divisions: International Inequalities Institute
Subjects: H Social Sciences > HJ Public Finance
H Social Sciences > HB Economic Theory
B Philosophy. Psychology. Religion > BF Psychology
JEL classification: D - Microeconomics > D1 - Household Behavior and Family Economics > D14 - Personal Finance
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H21 - Efficiency; Optimal Taxation
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H26 - Tax Evasion
H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H31 - Household
Date Deposited: 19 Nov 2021 11:03
Last Modified: 14 Dec 2021 11:27
URI: http://eprints.lse.ac.uk/id/eprint/112695

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