Tax incentives and borrowing

Sule Alan, Søren Leth-Petersen and Anders Munk-Nielsen

Economics Letters, 2016, vol. 145, issue C, 162-164

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.

Keywords: Interest rate deduction; Tax reform; Micro data (search for similar items in EconPapers)
JEL-codes: H24 H31 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:145:y:2016:i:c:p:162-164

DOI: 10.1016/j.econlet.2016.06.014

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