Emmanuel Saez on Tax Avoidance - Dictionary of Arguments
Saez I 132
Tax Avoidance/Saez/Zucman: (...) tax avoidance, in contrast to more fundamental responses to taxes, can be drastically reduced by policymakers. When all income - whether it derives from capital or labor, whether consumed or saved, whether booked in Bermuda or in the United States, whether paid to a bank account in Zurich or in Paris - is taxed at the same rate, and when the supply of tax dodges is strictly constrained, tax avoidance can almost disappear.
Saez I 133
(...) the 1986 Tax Reform Act—which reduced the top marginal income tax rate to 28% - led to a rise in the amount of income reported by the rich. But this increase was mostly due to changes in tax-avoidance strategies (as it became profitable to avoid the 35% corporate tax rate by organizing businesses as partnerships, subject to the individual income tax) and not an increase in labor supply.(1) /When tax avoidance is kept in check, the lesson from modern research is that the >elasticity of taxable income is generally quite low - and therefore the optimal tax rate quite high.)
1. See Slemrod (1990) and Saez (2004) for a discussion of tax avoidance responses around the Tax Reform Act of 1986. Moffitt and Wilhelm (2000) show that the increase in the taxable income of high-income individuals around the tax reform was not accompanied by an increase in hours of work:
-Slemrod, Joel. Do Taxes Matter? The Impact of the Tax Reform Act of 1986. Cambridge, MA: MIT Press 1990.
-Saez, Emmanuel. “Reported Incomes and Marginal Income Tax Rates, 1960–2000: Evidence and Policy Implications.” In James Poterba, ed., Tax Policy and the Economy, Volume 18. Cambridge, MA: MIT Press, 2004.
-Moffitt, Robert, and Mark Wilhelm. “Taxation and the Labor Supply Decisions of the Affluent.” In Joel Slemrod, ed., Does Atlas Shrug? The Economic Consequences of Taxing the Rich. New York: Russell Sage Foundation, 2000. 193–234._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Author1]Vs[Author2] or [Author]Vs[term] is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition.