This paper investigates how recent expansions to the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) in Puerto Rico shape labor force participation, household income, and overall well-being. Employing data from the Puerto Rico Community Survey and a difference-in-differences framework, it finds that greater credit generosity correlates with higher employment rates, increased earnings, and reductions in poverty. Because these tax credits link benefits directly to earned income, they especially help low-income and female-headed families, long excluded from key federal tax provisions. Results also suggest that these policies reduce reliance on traditional welfare programs and boost household financial stability. By situating Puerto Rico’s policy shifts within broader U.S. and global tax credit experiences, this study informs policy decisions aimed at mitigating persistent poverty and stimulating economic mobility on the island. Overall, expanded EITC and CTC appear to be critical tools for improving the economic well-being of Puerto Rican families.

This study estimates the elasticity of taxable income (ETI) for the highest 1% of earned income individuals, utilizing a change in taxation in 2013, when a new top tax bracket was added to the earned income tax scale in Finland. There are not yet many estimates for the top income elasticity in the literature, even though their response is crucial in determining the income-maximizing level of personal income taxation. This study contributes to the top income ETI literature by employing a triple differences-in-differences method comparing changes in income within the same income groups for different time periods. The results, derived from a two-year estimation period, suggest that the ETI for top earners may be higher than shown in the previous population estimates. This finding is primarily driven by individuals experiencing fewer labour market frictions, such as those who have changed employer or have multiple employers during the studied period.

This paper leverages administrative tax data from Kenya to make several contributions to our understanding of personal income taxation in developing countries. First, we exploit recent tax reforms to credibly estimate the elasticity of income to changes in marginal tax rates from a taxpayer panel with state-of-the-art methods, a novelty in the context of Sub-Saharan Africa. We find a value of 0.3 for our sample of ‘middle-class’ individuals, which conceals large disparities between inelastic public workers and a rather elastic private sector. Second, we combine administrative tax data with household survey data to properly measure income inequality and assess the success of income taxes and potential reforms in reducing it. We also triangulate these data sources to quantify the compliance gap at 23% of potential revenue, mainly attributable to self-employed workers. Finally, we rely on these tools to investigate the trade-offs faced by Kenyan policymakers.

We develop a theory of tax reforms for a setting with multi-dimensional heterogeneity amongst taxpayers and multiple economic decisions that are all subject to fixed and variable costs. The theorems in this paper provide a complete characterization of the conditions under which Paretoor welfare-improving tax reforms exist. We focus on one application, the taxation of couples, and present a detailed analysis of the behavioral responses to taxation in this setting. Squaring the theorems with this analysis yields sufficient statistics for the existence of Pareto- or welfareimproving tax reforms. In the empirical part, we apply them to US data. Our findings include the following: Tax rates on secondary earnings are inefficiently high when secondary earnings are close to primary earnings. Also, reducing the tax system’s degree of jointness is not Paretoimproving. Whether it raises welfare depends on a trade-off between poverty alleviation and gender balance.