Estimating the elasticity of taxable income: Evidence from top Japanese taxpayers

This study aims to estimate the elasticity of taxable income (ETI) with regard net-of-tax rate, precisely in terms potential for margin arising from behavioral response. We use panel data top Japanese taxpayers Tokyo during 1986–1989 and focus on tax policy changes caused by 1987–1989 comprehensive reform, which substantially reduced marginal rates. It is found that ETI rate approximately 0.158–0.226, considerably lower than those United States many European countries. One possible reason small estimates absence response choice deductions this study.