The elasticity of personal income: evidence from survey data

This paper uses income survey and tax burden data for Italy, in order to estimate the elasticity of personal income to taxation. The estimated elasticity is lower with a broad definition of personal income. Given the current tax structure and the system of tax expenditures, income shifting and tax avoidance behaviour are an important determinant of the personal income tax base. The estimated regression models also show, that labour market developments have contributed to decrease inequality in the 2000-2012 sample period. The elasticity estimates are employed to simulate the effects of the "80 euro tax bonus".