High-wage earners dodge taxes through strategic entry below income threshold
The study looked at how high-wage earners in Argentina responded to a temporary income tax break. Some workers were exempt from paying taxes for 2.5 years, while others still had to pay. The researchers found that the wage earners only slightly changed their behavior in response to the tax holiday, with a small increase in earnings. Those who were more flexible in their work hours or job choices were more likely to adjust. Some new workers even entered the job market strategically to avoid paying taxes. This shows that the labor market in Argentina has some rigidities that make it hard for workers to react quickly to changes in taxes.