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Do very high tax rates induce bunching? Implications for the Design of Income Contingent Loan Schemes

Chapman, Bruce; Leigh, Andrew


Under the Higher Education Contribution Scheme graduates face a sharp discontinuity in their taxable incomes. At the first repayment threshold, they are required to pay a percentage of their entire income to reduce their debts. This results in an extremely high effective marginal tax rate. Using a sample of taxpayer returns we investigate whether taxpayers bunch below the repayment threshold. We find a statistically significant degree of bunching below the threshold, but the effect is...[Show more]

CollectionsANU Research Publications
Date published: 2009
Type: Journal article
Source: The Economic Record
DOI: 10.1111/j.1475-4932.2009.00554.x


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