Abstract
ABSTRACT Income taxation affects individuals’ incentives to work, save, and take risks. These behavioural responses to taxation is key to evaluating efficiency cost of taxation. Especially, the response of rich individuals to taxation is important because of their impact on the tax revenue and on the economy. In this paper, I analyse the response of Major League Baseball players to the increase in the top tax rate due to the American Taxpayer Relief Act of 2012. Using difference-in-differences estimation applied to the players with different years of free agent contracts, I do not find any negative effect of the tax increase on the players’ performance.
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