The elasticity of taxable income in Spain: 1999-2014

Miguel Almunia and David López-Rodríguez ()
Additional contact information
David López-Rodríguez: Banco de España

No 1924, Working Papers from Banco de España

Abstract: We study how taxable income responds to changes in marginal tax rates, using as a main source of identifying variation three large reforms to the Spanish personal income tax implemented in the period 1999-2014. The most reliable estimates of the elasticity of taxable income (ETI) with respect to the net-of-tax rate for this period are between 0.45 and 0.64. The ETI is about three times larger for selfemployed taxpayers than for employees, and larger for business income than for labor and capital income. The elasticity of broad income (EBI) is smaller, between 0.10 and 0.24, while the elasticity of some tax deductions such as the one for private pension contributions exceeds one. Our estimates are similar across a variety of estimation methods and sample restrictions, and also robust to potential biases created by mean reversion and heterogeneous income trends.

Keywords: elasticity of taxable income; ETI; personal income tax; mean reversion; tax deductions; Spain (search for similar items in EconPapers)
JEL-codes: D63 H24 H31 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2019-07
New Economics Papers: this item is included in nep-eur, nep-lma, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://www.bde.es/f/webbde/SES/Secciones/Publicac ... /19/Fich/dt1924e.pdf First version, July 2019 (application/pdf)

Related works:
Journal Article: The elasticity of taxable income in Spain: 1999–2014 (2019)
Working Paper: The Elasticity of Taxable Income in Spain: 1999-2014 (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:1924

Access Statistics for this paper

More papers in Working Papers from Banco de España Contact information at EDIRC.
Bibliographic data for series maintained by Ángel Rodríguez. Electronic Dissemination of Information Unit. Research Department. Banco de España ().