Matias Giacabasso on How top earners respond to taxation? Evidence from a tax reform in Uruguay

Matias Giaccobasso presents at the WIDER Seminar Series on 06 November 2024.

How do top earners respond to taxation? Evidence from a tax reform in Uruguay 

Abstract

This paper looks at how the richest people respond to changes in personal income taxes, showing different ways they adjust. Using detailed data from tax records and changes in tax rates for the top 1% of earners in Uruguay, the study finds that people work less when taxes go up, with a response size of 0.577, partly due to them adjusting how much they work.

People are also more likely to shift their income from wages to corporate income to avoid taxes, with a much larger response (2.479), and shifting income from labour to corporate taxes accounts for most of this (with a value of -1.967).

The analysis also looks at how much efficiency is lost because of the tax reform and finds that at most, 31% of the expected extra tax revenue is lost due to these changes in behaviour. This suggests that the new higher tax rates are still raising more revenue than they are losing, meaning they are on the 'right' side of the Laffer curve.

About the presenter

Matias Giaccobasso (VATT Institute for Economic Research) is a senior researcher at the VATT Institute for Economic Research and the Finnish Center of Excellence in Tax Systems Research (FIT), based in Helsinki.

He obtained his PhD in 2023 from the University of California, Los Angeles, in the Global Economics and Management program at the Anderson School of Management.

His research interests include public economics, labor economics, development economics, and behavioural economics.

WIDER Seminar Series

The WIDER Seminar Series showcases the latest research on key topics in development economics. It provides a forum for senior and early-career researchers, both in-house and external, to present recent and ongoing work related to UNU-WIDER’s current work programme.

In addition to providing a forum for both academic debate and training, the series presents an opportunity for policymakers and others interested in development to learn about the latest research methods and findings.

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