If you did not read this a year and a half ago, go read it now: Emmanuel Saez (2016): Taxing the rich more—evidence from the 2013 federal tax increase

If you did not read this over at Equitable Growth Value Added a year and a half ago when it came out, you should go read it now: Emmanuel Saez (2016): Taxing the rich more—evidence from the 2013 federal tax increase: “In 2013, a surtax on high earners was levied to help pay for the Affordable Care Act at the same time as the 2001 tax cuts for high-income earners that were signed into law by President George W. Bush expired…

…The 2013 tax increase on high earners was the largest since the 1950s, and larger than the previous increase of the top tax rate by the Clinton administration in 1993…. How did the 2013 tax increase affect the behavior of the rich and the pre-tax incomes they reported on their tax returns?… There is a clear surge in… 2012 in anticipation … top 1 percent’s income share… from 19.6 percent in 2011 to 22.8 percent in 2012… before falling sharply back to 20 percent in 2013…. The spike in 2012 is due primarily to realized capital gains, which taxpayers can retime easily. But there is also retiming for other income categories….

What happened to top incomes in the medium-term?… The share of national income going to the top 1 percent income resumed its upward trend… by 2015 back up to 22 percent…. I estimate that only about 20 percent of the projected revenue increase from the 2013 tax hike is lost due to the behavioral responses over the medium term…. These findings echo the findings of earlier work analyzing the 1993 Clinton era tax increase, which also generated short-term retiming of top incomes into 1992 but did not prevent top income shares from surging…

April 18, 2018


Brad DeLong
Connect with us!

Explore the Equitable Growth network of experts around the country and get answers to today's most pressing questions!

Get in Touch