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Tax penalties on fluctuating incomes: estimates from longitudinal data

Author

Listed:
  • Daniel V. Gordon

    (University of Calgary
    University of Stavanger)

  • Jean-François Wen

    (University of Calgary)

Abstract

Progressive personal income taxes can cause individuals with fluctuating incomes to pay more taxes over time than individuals with constant incomes of the same average value. The implicit tax penalty violates principles of equity and may harm efficiency by discouraging risk-taking activities, such as entrepreneurship. This paper uses longitudinal data to estimate the tax penalties in six panels of Canadian data from 1993 to 2010. The effects of various income averaging policies for mitigating tax penalties are then examined.

Suggested Citation

  • Daniel V. Gordon & Jean-François Wen, 2018. "Tax penalties on fluctuating incomes: estimates from longitudinal data," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 25(2), pages 430-457, April.
    • Handle: RePEc:kap:itaxpf:v:25:y:2018:i:2:d:10.1007_s10797-017-9456-1
    DOI: 10.1007/s10797-017-9456-1
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    References listed on IDEAS

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    Cited by:

    1. Stefan Steinerberger & Aleh Tsyvinski, 2020. "On Vickrey's Income Averaging," Papers 2004.06289, arXiv.org.

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    More about this item

    Keywords

    Income tax; Income fluctuations; Progressivity;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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