Template-Type: ReDIF-Paper 1.0
Title: Labor Supply Responses to Income Taxation among Older Couples: Evidence from a Canadian Reform
Author-Name: Derek Messacar
Creation-date: 2022
Abstract: This paper estimates real and avoidance responses to income taxation among older couples in
Canada. Using administrative data and exploiting a unique reform affecting tax on pension income, I observe large effects on labor supply using an instrumental variables approach. However, workers respond to compensated changes in their average rather than marginal tax rates, consistent with ‘schmeduling’ behavior. Further, I show that taxable incomes vary with the availability of deductions, offering credible evidence of tax planning within couples. These findings provide new insights into the black box of intra-household labor supply and have implications for estimating excess burden of taxation.
Classification-JEL: D13, H24, H26
Keywords: Elasticity of taxable income; tax avoidance; unitary model; collective model;
schmeduling; empirical density design; instrumental variables
File-URL: https://ire.hec.ca/wp-content/uploads/2022/11/cahier_IRE_10_labor_supply_responses_income_taxation_older_couples.pdf
File-Size: 2100
Handle: RePEc:rsi:irersi:10