Recently, some countries have even taken more radical steps in the same direction. Given these considerations, it is not surprising that over the last two decades there has been a global trend toward the gradual reduction in the level and progressivity of personal income tax rates. Indeed, the high elasticity of taxable income with respect to tax rates typically reported in the public finance literature implies sizable deadweight losses in the presence of high personal income tax rates (e.g., Feldstein, 1995). High personal income tax rates are also often associated with negative effects on the real side of the economy. It is widely believed that high personal income tax rates are partially responsible for high levels of tax evasion everywhere, especially in emerging markets. Tax evasion is a pervasive worldwide phenomenon.
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