Emmanuel Saez on Taxes and Elasticity

Matthew Yglesias » Emmanuel Saez on Taxes and Elasticity:
See Saez's paper:
“The Elasticity of Taxable Income with Respect to Marginal Tax Rates: A Critical Review”
"First, they report that there’s little support for the idea that increases in marginal tax rates harm the economy but reducing people’s incentives to work. Studies, in other words, show low levels of labor supply elasticity with respect to marginal tax rates. But they observe that other forms of economic distortion are possible. And you can get a comprehensive look at them by looking at the comprehensive elasticity of taxable income.

In the US context, there seems to be a fair amount of such elasticity. And the elasticity is concentrated among taxpayers who itemize their deductions, and especially among high-income taxpayers. ...if you’re trying to raise some extra revenue from wealthy taxpayers it’s probably better to do that by curbing deductions than by raising rates. ...there seems to be a fair chance that growth could be boosted significantly by a broad tax reform that eliminates loopholes and lowers rates."