Working Paper: NBER ID: w24634
Authors: Isabel Z. Martinez; Emmanuel Saez; Michael Siegenthaler
Abstract: This paper estimates intertemporal labor supply responses to two-year long income tax holidays staggered across Swiss cantons. Cantons shifted from an income tax system based on the previous two years' income to a standard annual pay as you earn system, leaving two years of income untaxed. We find significant but quantitatively very small responses of wage earnings with an inter-temporal elasticity of .025 overall. High wage income earners and especially the self-employed display larger responses with elasticities around .1 and .25 respectively, most likely driven by tax avoidance. We find no effects along the extensive margin at all.\n\n
Keywords: Labor Supply; Income Tax Holidays; Frisch Elasticity; Tax Avoidance
JEL Codes: H31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| income tax holidays (H26) | labor supply (J20) |
| income tax holidays (H26) | wage earnings (J31) |
| income tax holidays (H26) | high wage earners (J31) |
| income tax holidays (H26) | self-employed individuals (L26) |
| income tax holidays (H26) | learning effect (C92) |
| labor supply (J20) | tax avoidance (H26) |
| income tax holidays (H26) | labor supply adjustments (J22) |