Int. J. of Public Policy   »   2017 Vol.13, No.6



Title: How does fiscal reform affect the elasticity of income tax revenues? The case of Spain, 2003-2008


Author: Diego Martínez-López


Address: Department of Economics, Pablo Olavide University, Ctra. Utrera, Km 1, 41013 Seville, Spain


Abstract: This paper estimates the extent to which an exogenous change in income affects income tax revenues. We focus on the case of Spain over the period 2003-2008, as the income tax experienced a substantial reform in 2007. Using both an analytical method and a numerical simulation, we find a significant increase in aggregate income tax elasticities from 1.4 for 2003-2006 to around 1.8 for 2007-2008. The sensitivity of results to the presence of housing tax credits, non-equiproportional variations in income, changes in income inequality and fiscal drag is also considered. Finally, some policy implications are drawn.


Keywords: income tax; progressivity; tax rates; tax credits; Spain.


DOI: 10.1504/IJPP.2017.10008750


Int. J. of Public Policy, 2017 Vol.13, No.6, pp.337 - 357


Date of acceptance: 10 Feb 2017
Available online: 30 Oct 2017



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