Tax Incentives and Borrowing

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We estimate the effect of a 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.
Original languageEnglish
JournalEconomics Letters
Pages (from-to)162–164
Publication statusPublished - 2016

ID: 162343430