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.
Int. J. of Public Policy, 2017 Vol.13, No.6, pp.337 - 357
Date of acceptance: 10 Feb 2017
Available online: 30 Oct 2017