Effects of predictable tax liability variation on household labor income
The result's identifiers
Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216208%3A11640%2F12%3A00389691" target="_blank" >RIV/00216208:11640/12:00389691 - isvavai.cz</a>
Result on the web
<a href="http://www.cerge-ei.cz/pdf/wp/Wp454.pdf" target="_blank" >http://www.cerge-ei.cz/pdf/wp/Wp454.pdf</a>
DOI - Digital Object Identifier
—
Alternative languages
Result language
angličtina
Original language name
Effects of predictable tax liability variation on household labor income
Original language description
Economic theory assumes that taxpayers use their true marginal tax rate (MTR) to guide their economic decisions. However, due to complexity of the tax system, taxpayers may incorrectly perceive their MTR, with implications for incentives. We first develop an updating model that formalizes this conjecture. It predicts that an unexpected increase in the previous year's tax liability pushes up the perception of the MTR in the current year, even though the MTR does not, in fact, change. We then examine whether household labor income responds to predictable (but not necessarily predicted) lump-sum variation in the previous year's tax liability due to loss of eligibility for the Child Tax Credit when the eligible child turns 17. Using an identification strategy based on an eligibility discontinuity, we find that losing the credit reduces, ceteris paribus, parental labor income in the year following the loss of the credit. This result is robust to a variety of tests and different data sources
Czech name
—
Czech description
—
Classification
Type
O - Miscellaneous
CEP classification
AH - Economics
OECD FORD branch
—
Result continuities
Project
<a href="/en/project/GAP402%2F10%2F2085" target="_blank" >GAP402/10/2085: Marginal Tax Rate Misperceptions</a><br>
Continuities
I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace
Others
Publication year
2012
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů