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

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  • Diego Martínez-López

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.

Suggested Citation

  • Diego Martínez-López, 2017. "How does fiscal reform affect the elasticity of income tax revenues? The case of Spain, 2003-2008," International Journal of Public Policy, Inderscience Enterprises Ltd, vol. 13(6), pages 337-357.
    • Handle: RePEc:ids:ijpubp:v:13:y:2017:i:6:p:337-357
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    Cited by:

    1. Golpe, Antonio A. & Sánchez-Fuentes, A. Jesus & Vides, José Carlos, 2023. "Fiscal sustainability, monetary policy and economic growth in the Euro Area: In search of the ultimate causal path," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 1026-1045.

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