The Korean Economic Review
Is Self-Employment Income More Responsive to Income Tax Rate?
Seng-Eun Choi (Korea Institute for Public Finance)Year 2014Vol. 30No. 1
The paper analyzes the administrative Schedule C self-employment taxable income dataand estimates compensated and uncompensated elasticity of self-employment taxable incomeof the United States. The paper finds that compensated elasticity of self-employment taxableincome ranges from 0.928 to 1.598, suggesting that the calculated average deadweight loss ofincome tax per $1,000 self-employment income ranges from $9 to $15, and from 7% to 12%of self-employment income tax revenue. The uncompensated elasticity of self-employmenttaxable income ranges from 0.953 to 2.810. This responsiveness of self-employment incomeand average deadweight loss reflect short-term responses of static taxable income rather thanlong-term responses. However, the empirical analysis in this paper suggests that the selfemploymenttaxable income is more responsive to the changes in tax rates than the taxableincome of wage workers.