Taxpayer responses in good times and bad

I show that the magnitude of taxpayer responsiveness, a key parameter in public finance, varies through time. Using linked administrative data and identifying responses from changes in notches, I document a marked decline in responsiveness during the Great Recession that cannot be explained by increased enforcement. I characterize which employee–employer pairs are best at reporting tax-advantaged incomes. Workers in industries with above-average responsiveness, such as construction, were disproportionately affected by the recession. I show responsiveness also declined for workers who remained matched with the same employers throughout the period.