Taxpayers may respond to changes in income tax rates in several manners. One way to classify them is to distinguish between behavioural changes (changes in labour supply, changes in the weights of the different types of labour income, changes in saving behaviour, etc.) and income reporting changes (timing, evasion, ...). Consequently, there might not be a perfectly proportional relationship between tax rate changes and tax revenues. This paper presents a methodology for the estimation of 1)income and 2)number of taxpayer elasticities with respect to marginal income tax rates. The model considers shares of total income and number of taxpayer for three income classes: medium ($50,000-$100,000), high ($100,000-$150,000) and highest ($150,000 and more) for a panel of Canadian provinces over the 1972-1996 period and for three sub-periods (1972-1976, 1977-1987, 1988-1996). The results show significant responses to tax rate changes from taxpayers in the high and highest income classes at the end of the period under study (1988-1996). Results obtained from the number of taxpayer share model also indicate that a significant part of the response of taxpayers to tax rate changes is explained by taxpayers moving to lower income classes.

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