Reported Taxable Income and Marginal Tax Rates: Evidence for Spain Based on the Fiscal Drag

Jorge Onrubia?Fernández & José Félix Sanz?Sanz
Authors registered in the RePEc Author Service: Jorge Onrubia

No 1075, Department of Economics - Working Papers Series from The University of Melbourne

Abstract: This paper quantifies the taxable income-marginal tax rate elasticities associated with Spanish Personal Income Tax. To that effect, according to Saez (2003), the fiscal drag between 1993 and 1994 was used as an instrument to identify the changes in the taxable income induced by changes in the marginal tax rates. The paper comes to the conclusion that income level, marital status and the tax declaration framework for married couples are determining factors of the fiscal response to changes in the marginal tax rates. Likewise, irregular income significantly increases the responses of taxpayers. The obtained elasticities suggest the existence of efficiency costs higher than those obtained by the traditional literature based exclusively on earned income.

Keywords: Personal income tax; taxable income elasticity; excess burden; fiscal drag. (search for similar items in EconPapers)
JEL-codes: H2 H3 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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