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Intertemporal Labor Supply Substitution?Evidence from the Swiss Income Tax Holiday
Isabel Martınez a Emmanuel Saez b Michael Siegenthaler a
aKOF ETH Zurich
bUC Berkeley
July 2020
The Frisch Elasticity of Labor Supply
How much more are people willing to work when their wageincreases temporarily, e.g., due to a positive technology shock?
Key parameter in macro models: it amplifies the effects ofproductivity shocks on labor supply and economic activity
Many business cycle models require very large Frisch elasticities(1.5− 4) to match business cycle movements in employment
Hard to identify well empirically, especially for a macro-widechange
Longstanding divide in the micro and macro literature
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 1/33
Contribution: A Population-wide Natural Experimentto Estimate the Observed Frisch Elasticity (with Frictions)
Tax holidays: income faces a tax rate τ = 0 for one period
Ideal natural experiment (Chetty et al., 2013):
exogenous variation in wage rates unrelated to labor supply orhuman capital accumulation decisionssubstantial temporary change in net-of-tax wagesentire populationannual frequency (relevant time frame for business cycles)quasi-pure substitution effect
Our paper:
Variation across time and regions
Identification: Diff-in-Diff (DiD) and Event Studies (ES)
Most closely related papers:
Bianchi et al. (2001), Stefansson (2018), Sigurdsson (2018):Tax holiday in Iceland, 1987
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 2/33
Contribution: A Population-wide Natural Experimentto Estimate the Observed Frisch Elasticity (with Frictions)
Tax holidays: income faces a tax rate τ = 0 for one period
Ideal natural experiment (Chetty et al., 2013):
exogenous variation in wage rates unrelated to labor supply orhuman capital accumulation decisionssubstantial temporary change in net-of-tax wagesentire populationannual frequency (relevant time frame for business cycles)quasi-pure substitution effect
Our paper:
Variation across time and regions
Identification: Diff-in-Diff (DiD) and Event Studies (ES)
Most closely related papers:
Bianchi et al. (2001), Stefansson (2018), Sigurdsson (2018):Tax holiday in Iceland, 1987
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 2/33
Contribution: A Population-wide Natural Experimentto Estimate the Observed Frisch Elasticity (with Frictions)
Tax holidays: income faces a tax rate τ = 0 for one period
Ideal natural experiment (Chetty et al., 2013):
exogenous variation in wage rates unrelated to labor supply orhuman capital accumulation decisionssubstantial temporary change in net-of-tax wagesentire populationannual frequency (relevant time frame for business cycles)quasi-pure substitution effect
Our paper:
Variation across time and regions
Identification: Diff-in-Diff (DiD) and Event Studies (ES)
Most closely related papers:
Bianchi et al. (2001), Stefansson (2018), Sigurdsson (2018):Tax holiday in Iceland, 1987
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 2/33
1990s Income Tax Reform in Switzerland
Transition from retrospective taxation to annual pay-as-you-earn
Reasons: modernizing, simplifying and harmonizing
Side effect: incomes earned during the two years prior to thechange remained untaxed (blank years, tax holiday)
Year%X 1993 1994 1995 1996 1997 1998 1999 2000
Tax%base%forassessment%period%X
Payment%of%%tax%lia@bility%owed%for%year%X
Income%realized%in%1999
Income%realized%in%2000
Provisional%installments%1999,%final%assessment%in%
2000
Provisional%installments%2000%final%assessment%in%
2001
Incomes%realized%in%%%%%%%%1991%+%1992%(averaged)
Incomes%realized%in%%%%%%%%1993%+%1994%(averaged)
During%1993%and%1994 During%1995%and%1996
Incomes%realized%in%%%%%%%%1995%+%1996%(averaged)
During%1997%and%1998
untaxed incomes!
Decided at Federal level in December 1990 (DBG and StHG)
Cantons chose different years to change: 1999, 2001, and 2003
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 3/33
Outline
1 Introduction
2 Estimation ApproachIdentifying VariationFirst StageSalienceCommon Macro TrendsData
3 ResultsExtensive Margin (Did more people work?)Intensive Margin (Did workers work more hours?)
4 Conclusion
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 4/33
Identifying Variation: Timing Across Regions
Blank Years in Each Canton
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 5/33
First Stage: Substantial Change in Average Tax Rates
05
1015
20
Avg.
tax
rate
in %
on
a gr
oss
inco
me
of 1
00K
CH
F (re
al v
alue
201
0)
1990 1995 2000 2005 2010
1997-98Tax Holiday in...
Total federal, cantonal and municipal tax, single taxpayer; weighted by municipality population.
1 CHF ≈ 1 USD
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 6/33
First Stage: Substantial Change in Average Tax Rates
05
1015
20
Avg.
tax
rate
in %
on
a gr
oss
inco
me
of 1
00K
CH
F (re
al v
alue
201
0)
1990 1995 2000 2005 2010
1997-98 1998Tax Holiday in...
Total federal, cantonal and municipal tax, single taxpayer; weighted by municipality population.
1 CHF ≈ 1 USD
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 6/33
First Stage: Substantial Change in Average Tax Rates
05
1015
20
Avg.
tax
rate
in %
on
a gr
oss
inco
me
of 1
00K
CH
F (re
al v
alue
201
0)
1990 1995 2000 2005 2010
1997-98 1998 1999-00Tax Holiday in...
Total federal, cantonal and municipal tax, single taxpayer; weighted by municipality population.
1 CHF ≈ 1 USD
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 6/33
First Stage: Substantial Change in Average Tax Rates
05
1015
20
Avg.
tax
rate
in %
on
a gr
oss
inco
me
of 1
00K
CH
F (re
al v
alue
201
0)
1990 1995 2000 2005 2010
1997-98 1998 1999-00Tax Holiday in...
Total federal, cantonal and municipal tax, single taxpayer; weighted by municipality population.
1 CHF ≈ 1 USD
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 6/33
First Stage: Substantial Change in Average Tax Rates
05
1015
20
Avg.
tax
rate
in %
on
a gr
oss
inco
me
of 1
00K
CH
F (re
al v
alue
201
0)
1990 1995 2000 2005 2010
1997-98 1998 1999-00 2000Tax Holiday in...
Total federal, cantonal and municipal tax, single taxpayer; weighted by municipality population.
1 CHF ≈ 1 USD
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 6/33
First Stage: Substantial Change in Average Tax Rates
05
1015
20
Avg.
tax
rate
in %
on
a gr
oss
inco
me
of 1
00K
CH
F (re
al v
alue
201
0)
1990 1995 2000 2005 2010
1997-98 1998 1999-00 2000 2001-02Tax Holiday in...
Total federal, cantonal and municipal tax, single taxpayer; weighted by municipality population.
1 CHF ≈ 1 USD
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 6/33
First Stage: Substantial Change in Average Tax RatesMean average tax rate in the economy: 11.1%
05
1015
20
Avg.
tax
rate
in %
on
a gr
oss
inco
me
of 1
00K
CH
F (re
al v
alue
201
0)
1990 1995 2000 2005 2010
1997-98 1998 1999-00 2000 2001-02Tax Holiday in...
Total federal, cantonal and municipal tax, single taxpayer; weighted by municipality population.
1 CHF ≈ 1 USD
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 6/33
First Stage: Substantial Change in Marginal Tax RatesMean marginal tax rate in the economy: 24%
010
2030
Mar
g. ta
x ra
te in
% a
t a g
ross
inco
me
of 1
00K
CH
F (re
al v
alue
201
0)
1990 1995 2000 2005 2010
1997-98 1998 1999-00 2000 2001-02Tax Holiday in...
Total federal, cantonal and municipal tax, single taxpayer; weighted by municipality population.
1 CHF ≈ 1 USD
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 7/33
Expected Behavioral Responses
Extensive margin (average tax rate): more people work
Intensive margin (marginal tax rate): people work more
Tax avoidance margin: shift earnings into tax holiday years
Expect larger responses for more elastic subgroups/subgroupswith larger tax changes
WomenHigh income earnersSelf-employed
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 8/33
Salience: Newspaper Coverage and Cantonal Votes
Newspaper Coverage
Newspapers and magazines extensively covered the tax holidays,starting prior to the tax-free years, and with region-specifictiming evidence
Many articles specifically discuss the tax saving opportunitiesexample
Cantonal Votes
14 out of 25 cantons held a referendum dates
Voting material explains the tax holiday to a broad publicvoting material
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 9/33
Common Macro Trends: Unemployment Rates
0
.02
.04
.06
.08
Une
mpl
oym
ent r
ate
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
1997-98 1998 1999-00 2000 2001-02Switzerland
Tax Holiday in...
GDP to: ES regression
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 10/33
Main Data: Matched AHV-Census Data
Social security data (AHV) 1981-2010
panel data covering the universe of the Swiss population
entire individual labor market histories containinguncapped labor incomes (incl. bonuses and stock options)
job spells and unemployment spells per month
+ Census 2000 and 2010
residential history
marital status history
household identifier (relevant for tax calculation)
children
education
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 11/33
Main Data: Matched AHV-Census Data
Disadvantages
hours worked not known → focus on labor earnings
non-random missing data in 1998 for employees→ 1998 generally excluded from analysis
self-employment incomes missing in 1999 & 2000
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 12/33
Outline
1 Introduction
2 Estimation ApproachIdentifying VariationFirst StageSalienceCommon Macro TrendsData
3 ResultsExtensive Margin (Did more people work?)Intensive Margin (Did workers work more hours?)
4 Conclusion
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 13/33
Outline
1 Introduction
2 Estimation ApproachIdentifying VariationFirst StageSalienceCommon Macro TrendsData
3 ResultsExtensive Margin (Did more people work?)Intensive Margin (Did workers work more hours?)
4 Conclusion
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 13/33
Wage Employment Rate: Men Aged 20-60
55
65
75
85
95
Wag
e em
ploy
ees/
popu
latio
n (in
%)
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
1997-98 1999-00 2001-021998 2000
Tax Holiday in...
Data source: AHV-STATPOP
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 14/33
Wage Employment Rate: Women Aged 20-60
55
65
75
85
95
Wag
e em
ploy
ees/
popu
latio
n (in
%)
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
1997-98 1999-00 2001-021998 2000
Tax Holiday in...
Data source: AHV-STATPOP SLFS
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 15/33
Event Study - Regressions at Individual Level
Yit = αi + αt +4
∑k=−4
δkTHkct + Xit + εit
Yit : outcome of individual i in period t
αi and αt : person and year fixed effects
∑4k=−4 δkTH
kct : a sequence of event study dummies equal to 1
k periods away from the first year of the federal tax holiday incanton c (excluding t − 2, which serves as reverence period)
Controls Xit : age, age squared, age by gender; linear time trendsby canton of residence; two dummies for t ≤ 5 and t ≥ 5
Identifying assumptions:
Common trends in outcomes(e.g., employment and unemployment rates)
Elastic labor demand
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 16/33
Event Study - Regressions at Individual Level
Yit = αi + αt +4
∑k=−4
δkTHkct + Xit + εit
Yit : outcome of individual i in period t
αi and αt : person and year fixed effects
∑4k=−4 δkTH
kct : a sequence of event study dummies equal to 1
k periods away from the first year of the federal tax holiday incanton c (excluding t − 2, which serves as reverence period)
Controls Xit : age, age squared, age by gender; linear time trendsby canton of residence; two dummies for t ≤ 5 and t ≥ 5
Identifying assumptions:
Common trends in outcomes(e.g., employment and unemployment rates)
Elastic labor demandIntertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 16/33
Was Labor Demand Elastic?
Tax holidays create incentive to increase labor supply
If labor demand is not perfectly elastic: wage rate could fall→ dampened effect on earnings→ estimated Frisch elasticity too low
BUT: Wage Structure Survey (LSE) shows:
If anything increasing wage ratesSmall but positive response of hours worked
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 17/33
Wage Rate
32
34
36
38
40
42
Hou
rly w
age
(in C
HF)
1994
1996
1998
2000
2002
2004
2006
2008
2010
1998 1999-00 or 2000 2001-02Tax Holiday in...
Data Source: Wage Structure Survey (LSE)
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 18/33
Hours Worked
150
155
160
165
170
175H
ours
wor
ked
per w
orke
r
1994
1996
1998
2000
2002
2004
2006
2008
2010
1998 1999-00 or 2000 2001-02Tax Holiday in...
Data Source: Wage Structure Survey (LSE)single women married women SLFS
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 19/33
Event Study: First Stage
-.05
0
.05
.1
.15Ef
fect
of t
ax h
olid
ay
k=-4
k=-3
k=-2
k=-1
1st T
H
2nd T
H k=2
k=3
k=4
Years from tax holiday start
log(1 - average tax rate)
this is a place holder
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 20/33
Event Study: Extensive Margin (Wage Earners)
-.05
0
.05
.1
.15Ef
fect
of t
ax h
olid
ay
k=-4
k=-3
k=-2
k=-1
1st T
H
2nd T
H k=2
k=3
k=4
Years from tax holiday start
log(1 - average tax rate)Employment 0/1
detail
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 21/33
Nothing Ever Happens at the Extensive Margin
Married women
Older workers (age 51-60)
Number of jobs
Months employed
Entry or exit of self-employed
...
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 22/33
Outline
1 Introduction
2 Estimation ApproachIdentifying VariationFirst StageSalienceCommon Macro TrendsData
3 ResultsExtensive Margin (Did more people work?)Intensive Margin (Did workers work more hours?)
4 Conclusion
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 23/33
Average Wage Earnings
0
10
20
30
40
50
60
70
Wag
e ea
rnin
gs p
er p
erso
n (in
1k
CH
F)
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
1997-98 1999-00 2001-021998 2000
Tax Holiday in...
1 CHF ≈ 1 USD
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 24/33
Average Self-employment Earnings
0
20
40
60
80
100Se
lf-em
ploy
men
t ear
ning
s (in
1k
CH
F)
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
1997-98 1999-00 2001-021998 2000
Tax Holiday in...
Sample: Individuals with positive self-employment earnings
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 25/33
Event Study: First Stage
-.1
-.05
0
.05
.1
.15
.2
.25Ef
fect
of t
ax h
olid
ay
k=-4
k=-3
k=-2
k=-1
1st T
H
2nd T
H k=2
k=3
k=4
Years from tax holiday start
log(1 - marginal tax rate)
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 26/33
Event Study: Intensive Margin (Wage Earners)
-.1
-.05
0
.05
.1
.15
.2
.25
Effe
ct o
f tax
hol
iday
k=-4
k=-3
k=-2
k=-1
1st T
H
2nd T
H k=2
k=3
k=4
Years from tax holiday start
log(1 - marginal tax rate)Average wage earnings
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 27/33
Event Study: Intensive Margin (Wage Earners)
-.02
0
.02
.04
Effe
ct o
f tax
hol
iday
k=-4
k=-3
k=-2
k=-1
1st T
H
2nd T
H k=2
k=3
k=4
Years from tax holiday start
Average wage earnings
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 28/33
Frisch Elasticity Estimates (Wage Earners) IV est.
Frisch elasticity ηF = ∆ ln y/∆ ln[1− τ]
Men Women
Employ- Earningsa Employ- Earningsa
ment rate p. employee ment rate p. employee
Panel A: Total sampleFrisch elasticity ηF -0.001 0.037* -0.017 0.018
Panel B: Married with childrenFrisch elasticity ηF -0.005 0.052 -0.071 0.027
Panel C: Married no childrenFrisch elasticity ηF -0.004 0.032** 0.023 0.016
Observations 105 105 105 105Canton group FE Yes Yes Yes YesPeriod FE Yes Yes Yes Yes
a In 1000 CHF. *p < 0.1, ** p < 0.05, *** p < 0.01.
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 29/33
Average Wage Earnings: High-income Employees
100
125
150
175
200
Wag
e ea
rnin
gs p
er p
erso
n (in
1k
CH
F)
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
1997-98 1999-00 2001-021998 2000
Tax Holiday in...
High income: avg. real wage earnings in 1994-1996 > 100k CHF/year
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 30/33
Frisch by Pre-Reform Earnings (annual avg. 1994-1996) IV est.
Emp. rate Earnings Earnings Earnings(in %) p.p. (incl. 0) p. employee p. self-empl.
Panel A: 1–25k CHFFrisch elasticity ηF -0.025 0.034 0.070 0.236
25k–50k CHFFrisch elasticity ηF -0.010 0.013 0.020 0.238
50k–100k CHFFrisch elasticity ηF -0.009 0.013 0.018 0.261**
100k–200k CHFFrisch elasticity ηF -0.001 0.037** 0.038** 0.248***
More than 200k CHFFrisch elasticity ηF -0.001 0.086*** 0.089** 0.182***
Observations 105 105 105 80Canton group FE Yes Yes Yes YesPeriod FE Yes Yes Yes Yes
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 31/33
Event Study: Self-Employment Income By gender
-.1
-.05
0
.05
.1
.15
.2Ef
fect
of t
ax h
olid
ay
k=-4
k=-3
k=-2
k=-1
1st T
H
2nd T
H k=2
k=3
k=4
Time from tax holiday start
All self-employed>100k CHF in 1994/96
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 32/33
Conclusion
1 Significant but quantitatively small responses of earningsconsistent with an observed Frisch elasticity of 0.05
2 No responses along the extensive margin, even for groups lessattached to the labor force
3 Self-employed and high income earners display larger responses
4 Estimates may even be upward biased due to tax avoidance
Our results do not support the idea that the labor supply channelplays a major role in explaining business cycles.
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 33/33
Thank you.
Comments and questions welcome:[email protected]
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 34/33
Appendix
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 35/33
Empirical Evidence: Extensive Margin Elasticity
εFext =∆log(E/P)∆log(wnet)
Chetty et al. (2013), Table 1
back
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 36/33
Average Tax Rates over Time: Low Income Households
02
46
Avg.
tax
rate
in %
on
a gr
oss
inco
me
of 2
5K C
HF
(real
val
ue 2
010)
1990 1995 2000 2005 2010
1997-98 1998 1999-00 2000 2001-02Tax Holiday in...
Total federal, cantonal and municipal tax, single taxpayer; weighted by municipality population.
Data source: Parchet (2018) and ESTV, own calculations back
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 36/33
Average Tax Rates over Time: SSER-Sample
0
5
10
15
20
25Av
erag
e ta
x ra
te in
%
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
1997-98 1999-00 2001-021998 2000
Tax Holiday in...
Data source: Parchet (2018) and ESTV, SSER-data, own calculations back
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 37/33
Marginal Tax Rates over Time: SSER-Sample
0
5
10
15
20
25M
argi
nal t
ax ra
te in
%
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
1997-98 1999-00 2001-021998 2000
Tax Holiday in...
Data source: Parchet (2018) and ESTV, SSER-data, own calculations back
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 38/33
Iceland 1987 Tax Holiday: No Obvious Counterfactual
Em
ploy
men
t Rat
e
Year
Empirical (Bianchi et al. 2001)
75%
80%
85%
90%
95%
1982 1984 1986 1988 1990 1992
Figure 1a: 1987 Tax Holiday in Iceland
back
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 39/33
Salience: Newspaper Coverage by Region
Number of articles per outlet referring to the tax holidays back
0
20
40
60
Artic
les
per n
ewsp
aper
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
1998 (NZZ, Tages-Anzeiger)1999-00 (Der Bund, BZ, Neue Luzerner Zeitung)2000 (Solothurner Zeitung, Tribune de Genève)2001-02 (24 Heures, Le Matin, Le Temps)
Tax holiday in...
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 40/33
Salience: Popular Referenda Held in 14 Cantons
Dates of popular referenda on the reform back
ZH 8.6.1997
AG 18.4.1999AI 25.4.1999
GR 13.6.1999BL 13.6.1999
OW 24.10.1999GL 7.5.2000AR 21.5.2000BE 21.5.2000UR 21.5.2000
SH 27.8.2000SZ 24.9.2000
NW 26.11.2000ZG 26.11.2000
1996 1997 1998 1999 2000 2001 2002 2003 2004Date of popular referendum
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 41/33
Salience: Newspaper Coverage backWalliser Bote | Freitag, Februar 16, 2001 | None | 25 http://newspaper.archives.rero.ch/Olive/APA/SNL_DE/Print.Page.aspx...
1 of 1 16.06.17, 10:38
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 42/33
Salience: Cantonal Voting Material
Jahr 1997 1998 1999 2000 2001 ' Einkünfte: Ordentliches Jahreseinkommen 70000 70000 80'000 90'000 65'000 ausserordentliche Einkünfte 100'000 20000 inkl. ausserordentliche Aufwendungen 30000 0 inkl. Steuerveranlagung: ordentl. Einkommen: Revision vorbehalten! 70'000 70'000 65'000 (80000 und 90000 fallen in die Bemessungslücke) ausserordentliches Einkommen: (separate Jahressteuer) ausserordentliche Aufwendungen:
100'000 20'000
Revision der HE 1999/2000: 55'000 55'000 70000 — (30000 : 2) = 55000
altes Recht / übergangsrecht neues Recht Kalenderjahr 1997 1998 1999 2000 2001 2002 Steuerperiode 1999/2000 Bemessungsperiode Deklaration
Separate Besteuerung der ausserordentl. Einkünfte
der Bemessungslücke Deldaration
Revision der HE 99/00 für ausserord. Aufwendungen
der Bemessungslücke / Dekl.
rei'
)00(X )000(
2f7
I7 XXXX XXXX
Steuerperiode 2001 Bemessungsperiode Deklaration 27
Steuerperiode 2002 Bemessungsperiode
Schematische Darstellung der Übergangsregelung:
3.2.2 Aufhebung der Steuerbefreiung der AI-Beteiligungserträge
Das geltende Steuergesetz befreit die Be-teiligungen an im Kanton steuerpflichti-gen Kapitalgesellschaften und Genossen-schaften und deren Ausschüttungen. Sie werden nur für die Satzbestimmung mit-berücksichtigt. Diese Bestimmung be-
zweckt die wirtschaftliche Förderung und Anbindung der einheimischen Be-triebe bzw. die angestrebte Wohnsitznah-me der Eigentümer im Kanton.
Diese Steuerbefreiung ist aus der Sicht des StHG und nach Art. 4 der Bundesver-fassung nicht mehr zulässig. Die wirt-schaftliche Doppelbesteuerung, d.h. zu-
erst die Besteuerung des Gewinns bei der Gesellschaft und später die Besteuerung der ausgeschütteten Dividende bei den Aktionären ist im schweizerischen Steu-ersystem klar gewollt. Eine Steuerbefrei-ung von (bestimmten) ausgeschütteten Dividenden würde die Grundsätze der Rechtsgleichheit und der Besteuerung nach der wirtschaftlichen Leistungs-fähigkeit verletzen. Standeskommission und Grosser Rat ver-treten die Auffassung, dass die Aufhe-bung dieser Steuerbefreiung mindestens teilweise zu kompensieren ist. Dies soll einerseits durch eine Senkung des Steu-ertarifs auf Stufe Kapitalgesellschaft ge-schehen. Die Benachteiligung des Kan-tons als Wirtschaftsstandort wegen seiner peripheren Verkehrslage kann aber auf Stufe Unternehmung nicht genügend ausgeglichen werden. Es sind zusätzliche steuerliche Anreize für die Unternehmer notwendig, damit Appenzell I.Rh. auch als Wohnortskanton attraktiver wird. Dies soll durch eine ermässigte Besteue-rung der Beteiligungserträge auf Stufe Aktionär geschehen. Die Gestaltung des
3.2.3 Totalrevision
Das geltende kantonale Steuergesetz vom 28. April 1968 ist seit dem 1. Januar 1969 in Kraft. Seither erfuhr es insgesamt neun Teilrevisionen. Nach der dreissigjährigen Geltungsdauer des Steuergesetzes von
Einkommenssteuertarifs liegt im kanto-nalen Hoheitsgebiet. Diese Ermässigung bezweckt, die tatsächliche wirtschaftli-che Doppelbelastung zu mildern, soweit die ausgeschütteten Beteiligungserträge bereits in der gehaltenen Gesellschaft voll besteuert worden sind. Dies erfolgt beim Aktionär durch die Anwendung des halben Gesamtsteuersatzes, vorausge-setzt sein Anteil an der gesamten Beteili-gung beträgt mindestens 20 % oder weist einen Verkehrswert von mindestens 2 Mio. Franken auf; das übrige Einkom-men bleibt zum Gesamtsteuersatz steuer-bar. Durch die Ermässigung im Verhält-nis zum Gesamteinkommen bleibt der Grundsatz der Besteuerung nach der wirtschaftlichen Leistungsfähigkeit ge-währleistet; die Ermässigung ist für Be-teiligungen an inner- und ausserkantona-len Gesellschaften anwendbar, womit das Gebot der Rechtsgleichheit eingehalten ist. Die Tarifermässigung muss aus Kon- trollgründen und wegen der nicht vergleichbaren ausländi-schen Steuerrechte auf schweizerische Gesellschaften begrenzt werden.
1968 ist eine weitere Anpassung des kan-tonalen Steuerrechts an das Bundeshar-monisierungsrecht erforderlich, welche eine umfassende Revision des kantonalen Steuerrechts notwendig macht. Die Fülle der vorzunehmenden materiellen Ände-rungen, insbesondere betreffend die neue
Vereinfachtes Zahlenbeispiel:
Die Steuerermässigung sei an folgenden Beispielen dargestellt:
Steuerbares Einkommen (satzbestimmend) 80'000 80'000 200'000 800'000 davon Beteiligungsertrag 20'000 60'000 50'000 700'000 Steuerbares Einkommen ohne Beteilig.ertrag 60'000 20'000 150'000 100'000
Steuerberechnung (einfache Steuer): a/Beteiligungsertrag 520 1'560 1'825 28'000 a/übrigem Einkommen 3'120 1'040 10'950 8'000 Total einfache Steuer 3'640 2'600 12'775 36'000
Vergleich: Vollbesteuerung ohne Privilegierung 4'160 4'160 14'600 64'000 Steuerermässigung in Fr. 520 1'560 1'825 28'000 Steuermässigung in % der Vollbesteuerung 12,5 °A 37,5 % 14,3 ''/o 43,8 %
86 87
This table explains the transition with a numerical example,pointing out the blank years and extraordinary incomes andexpenses (canton AI).
back
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 43/33
Salience: Pillar 3a Savings
No incentives to contribute to pillar 3a during blank years back
.2
.4
.6
.8
1
1.2
Num
ber o
f acc
ount
s (in
mio
)
1990 1995 2000 2005
banks insurances3a accounts held by
Log scale.Source: BFS, BSV
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 44/33
Common Macro Trends: Growth in GDP p.c.
-10
-50
510
Annu
al g
row
th ra
te in
GD
P p.
c.
1990 1992 1994 1996 1998 2000 2002 2004
1997-98 1998 1999-00 2000 2001-02Switzerland
Tax Holiday in...
to: unemployment to: ES regression
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 45/33
Hours Worked per Month: Married Women
105
110
115
120
125
Hou
rs w
orke
d pe
r per
son
empl
oyed
1996 1998 2000 2002 2004 2006 2008 2010
1998 1999-00 2001-02Tax Holiday in...
Data Source: Wage Structure Survey (LSE) back
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 46/33
Hours Worked per Month: Single Women
145
150
155
160
165
Hou
rs w
orke
d pe
r per
son
empl
oyed
1996 1998 2000 2002 2004 2006 2008 2010
1998 1999-00 2001-02Tax Holiday in...
Data Source: Wage Structure Survey (LSE) back
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 47/33
Hours Worked per Week (SLFS)
2527
2931
3335
Hou
rs w
orke
d pe
r wee
k
1995 1997 1999 2001 2003 2005 2007 2009
1997-98 1999-00 2001-02Tax holiday in...
Data Source: SLFS (SAKE) back
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 48/33
Event Study: Extensive Margin (Wage Earners)
-.05
-.025
0
.025
.05Ef
fect
of t
ax h
olid
ay
k=-4
k=-3
k=-2
k=-1
1st T
H
2nd T
H k=2
k=3
k=4
Years from tax holiday start
Employment (Extensive Margin)
back
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 49/33
Employment Rate (SLFS)
5565
7585
95Em
ploy
men
t rat
e in
%
1995 1997 1999 2001 2003 2005 2007 2009
1997-98 1999-00 2001-02Tax holiday in...
Data source: SLFS (SAKE) back
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 50/33
Months Employed, Number of Jobs, the Share ofSelf-Employed, and Between-Canton Migration
(1) (2) (3) (4)Jobs per Months employed Unemployed / In-migrant /employed per employed pop (in %) pop. (in %)
Total sampleBlank year -0.0031 0.0178 -0.306 -0.020
(0.0052) (0.0108) (0.239) (0.052)MenBlank year -0.0030 0.0173 -0.307 -0.027
(0.0055) (0.0112) (0.266) (0.048)WomenBlank year -0.0031 0.0175 -0.318 -0.010
(0.0054) (0.0132) (0.223) (0.056)Married womenBlank year -0.0033 0.0152 -0.303 0.012
(0.0066) (0.0194) (0.180) (0.024)
Observations 105 105 105 105Canton group FE Yes Yes Yes YesPeriod FE Yes Yes Yes Yes
back
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 51/33
Individual-level IV Estimates (Wage Earners) Macro estimates
Employee Avg. wage Employee Avg. wage0/1 earnings a 0/1 earnings a
Men Men Women Women
Total sample1st stage 0.115 0.248 0.106 0.238Effect on log(1− τit ) (0.002) (0.004) (0.002) (0.004)
2nd stage -0.008 3,792 -0.015 323log(1− τit ) (0.005) (606) (0.007) (251)
Frisch elasticity ηF -0.01 (0.005) 0.04 (0.006) -0.02 (0.009) 0.01 (0.005)
Observations 12,905,961 10,878,290 13,241,977 9,470,890
Married w/ childrenFrisch elasticity ηF 0.00 (0.005) 0.04 (0.007) 0.00 (0.015) 0.05 (0.008)
Married no childrenFrisch elasticity ηF -0.03 (0.006) 0.03 (0.005) -0.01 (0.006) 0.01 (0.003)
Tertiary educationFrisch elasticity ηF 0.00 (0.007) 0.05 (0.006) -0.02 (0.008) 0.01 (0.005)
a In CHF. Numbers in bold indicate statistical significance with p < 0.05.
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 52/33
Individual-level IV Estimates by Pre-Holiday Earnings(Wage Earners) Macro estimates
Employee Aver. wage Employee Aver. wage0/1 earnings 0/1 earningsMen Men Women Women
1–25k CHFFrisch elasticity ηF -0.01 (0.025) -0.01 (0.025) -0.04 (0.012) -0.03 (0.018)
25–50k CHFFrisch elasticity ηF -0.01 (0.010) 0.03 (0.008) -0.01 (0.006) 0.02 (0.004)
50–100k CHFFrisch elasticity ηF -0.02 (0.004) 0.03 (0.004) -0.01 (0.006) 0.01 (0.003)
100–200k CHFFrisch elasticity ηF -0.02 (0.007) 0.04 (0.006) -0.01 (0.015) 0.02 (0.010)
>200k CHFFrisch elasticity ηF 0.00 (0.010) 0.08 (0.015) -0.09 (0.062) 0.09 (0.046)
Numbers in bold indicate statistical significance with p < 0.05.
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 53/33
Event Study: Self-Employment Income by Gender back
-.1
-.05
0
.05
.1
.15
.2Ef
fect
of t
ax h
olid
ay
k=-4
k=-3
k=-2
k=-1
1st T
H
2nd T
H k=2
k=3
k=4
Time from tax holiday start
MaleFemale
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 54/33
Bonus-Incidence: Male Employees in the Private Sector
Fraction with bonus above 5K CHF
.05
.1
.15
.2
.25
Bonu
s >5
K C
HF
rece
ived
1994
1996
1998
2000
2002
2004
2006
2008
2010
1998 1999-00 or 2000 2001-02Tax Holiday in...
Data Source: Wage Structure Survey (LSE) Insurances Anecdotal evidence Conclusion
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 55/33
Bonus Incidence: Insurance Industry
Fraction with bonus above 20K CHF0
.02
.04
.06
.08
.1Bo
nus
>20K
CH
F re
ceiv
ed
1996 1998 2000 2002 2004 2006 2008 2010
1998 1999-00 2001-02Tax Holiday in...
Data Source: Wage Structure Survey (LSE) back Conclusion
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 56/33
Anecdotal Evidence:Doctors Shift Billing of Treatment Costs
back Conclusion
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 57/33
References I
Bianchi, Marco, Bjorn R. Gudmundsson, and Gylfi Zoega, “Iceland’sNatural Experiment in Supply-Side Economics,” The American EconomicReview, 2001, 91 (5), 1564–1579.
Chetty, Raj, Adam Guren, Dayanand S. Manoli, and Andrea Weber, “DoesIndivisible Labor Explain the Difference between Micro and MacroElasticities? A Meta-Analysis of Extensive Margin Elasticities,” NBERMacroeconomics Annual, 2013, 27 (1), 1–56.
Parchet, Raphael, “Are Local Tax Rates Strategic Complements or StrategicSubstitutes?,” American Economic Journal: Economic Policy, 2018,forthcoming.
Sigurdsson, Josef, “Labor Supply Responses and Adjustment Frictions: ATax-Free Year in Iceland,” Working Paper 2018.
Stefansson, Arnaldur, “Labor supply response to a tax holdy: The take-homefrom a large and salient shock,” Mimeo 2018.
Intertemporal Labor Supply Substitution Martınez, Saez, Siegenthaler 58/33