ESRI Research Seminar-Taxpayer Responses over the Cycle: Evidence from Irish Notches

Venue: ESRI, Whitaker Square, Sir John Rogersons Quay, Dublin 2

Speaker: Enda Hargaden, University of Michigan

Abstract:

This paper investigates the response of taxpayers to changes to tax notches in Ireland before and after the Great Recession. Pre-2009 there is clear evidence of bunching in the earnings distribution below tax notch thresholds, just avoiding large tax liabilities. This evidence disappears from 2009 onwards: the treatment effects of a notch before the recession are three times larger than those in later years. This suggests that the taxpayer response is smaller during a recession. Much of the difference reflects reduced employment in sectors such as construction that exhibit above-average ability to report tax-advantaged incomes. The changing composition of the labour force alone cannot fully explain the results: the determinants of reporting a tax-advantaged income for people who remained with the same firms also vary substantially over the cycle.

Speaker Bio:

Enda Hargaden is a Ph.D. candidate in economics at the University of Michigan. He is an applied microeconomist, with a focus on public finance. His Job Market Paper "Taxpayer Responses over the Cycle: Evidence from Irish Notches" finds that employees respond less to tax incentives during recessions. Mr. Hargaden holds a BA in Economics from Trinity College, Dublin, and an MA in Economics from University College Dublin.