Social Sciences
8 years ago

Tax changes in the 1980s led to income shifting among high earners.

High-Income Families and the Tax Changes of the 1980s: The Anatomy of Behavioral Response
Joel Slemrod

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The Tax Reform Act of 1986 led to a significant increase in reported income for high-income families. This was mainly due to income shifting, not new income creation. The Act caused a spike in income concentration among the affluent, which was not fully explained by demand-side factors. This suggests that the tax changes were a major factor in the rise of high-income households' reported income.