Tax incentives and borrowing

descriptionPublicationkeyboard_double_arrow_right Article 01 Aug 2016 Denmark, United Kingdom English Publisher:Elsevier BVJournal:Economics Letters, volume 145, pages 162-164 (issn: 0165-1765,

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Authors: Alan, Sule; Leth-Petersen, Søren; Munk-Nielsen, Anders;

doi: 10.1016/j.econlet.2016.06.014

Tax incentives and borrowing

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Abstract

We estimate the effect of the Danish 1987 tax reform, which reduced the tax rate applied to interest deductions from 73% to 50% for households with high incomes, but less for households with middle or low incomes. Using high quality panel data we find that households responded to the reduced tax subsidy by lowering interest payments and we find that the responsiveness to the tax subsidy varies by the initial level of interest payments.

Countries

Denmark, United Kingdom

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Keywords

HB Economic Theory, 330, HJ Public Finance

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