All in the Family: Aggregation and the Interpretation of Tax Bunching

Abstract
Bunching at tax kinks shows that reported income responds to incentives, but not whether total income
changes or income is merely reallocated across taxpayers. We show that real responses constrain the
distribution of total family income, whereas reallocation can generate individual bunching while leaving
family income smooth. Using linked Australian tax records from 2001 to 2022 and a novel global
bootstrap Kolmogorov–Smirnov test, we find sharp individual bunching in every year but no detectable
bunching in family average income. The results suggest that individual bunching in Australia is driven
primarily by intra-family income shifting rather than real responses.

This is a substantially revised version of TTPI Working Paper 2/2026