Personal Income Tax Decentralization, Inequality and Social Welfare

Julio López-Laborda and Jorge Onrubia

No E2004/17, Economic Working Papers at Centro de Estudios Andaluces from Centro de Estudios Andaluces

Abstract: This paper elaborates and evaluates a model for the decentralization of personal income tax which is consistent with the optimal redistribution model proposed by Tresch (2002), within a framework od social welfare à la Atkinson and Bourguignon (1987). Each region applies to its constituents a progressive tax, and the central government establishes a surcharge (or deduction) proportional to the income of individuals, net of the respective regional taxes. Our paper presents the conditions which permit this model to be recommended in terms of the reduction of income inequality and the increases of welfare, in each region and in the country as a whole. The theoretical results are applied to the Spanish IRPF, by the performance of various microsimulation exercises.

Keywords: personal income tax; decentralization; inequality; social welfare. (search for similar items in EconPapers)
JEL-codes: C32 F31 F33 (search for similar items in EconPapers)
Pages: pages
Date: 2004
New Economics Papers: this item is included in nep-pub
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Journal Article: Personal Income Tax Decentralization, Inequality, and Social Welfare (2005)
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