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Flat tax reforms: a general equilibrium evaluation for Spain

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Author Info

  • Marta González-Torrabadella

    (Independent scholar)

  • Josep Pijoan-Mas

    (CEMFI and CEPR)

Abstract

This paper quantifies the aggregate and distributional implications of an array of revenue neutral flat tax reforms for Spain. A standard general equilibrium economy with heterogeneous agents is used to evaluate the impact of the tax reforms. We find that different flat tax reforms may generate important changes of aggregate allocations in opposite directions. Among all the reforms, a marginal tax equal to 23.11% and a fixed deduction equal to 30% of per capita income will yield increases in aggregate output, aggregate consumption and labor productivity equal to 5.1%, 4.8% and 2.8% respectively. Admittedly, this type of reforms also generate increases in the gini indexes of after tax income and consumption. However, the proposed reform reduces the tax bill of the bottom 60% of the income distribution.

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Bibliographic Info

Article provided by Fundación SEPI in its journal Investigaciones Economicas.

Volume (Year): 30 (2006)
Issue (Month): 2 (May)
Pages: 317-351

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Handle: RePEc:iec:inveco:v:30:y:2006:i:2:p:317-351

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Related research

Keywords: Income tax; heterogeneous agents; general equilibrium;

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References

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  1. Xisco Oliver & Amedeo Spadaro, 2003. "¿Renta Mínima o Mínimo Vital? Un Análisis sobre los Efectos Redistributivos de Posibles Reformas del Sistema Impositivo Español," DEA Working Papers 1, Universitat de les Illes Balears, Departament d'Economía Aplicada.
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Citations

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Cited by:
  1. Paulus, Alari & Peichl, Andreas, 2008. "Effects of flat tax reforms in Western Europe on equity and efficiency," EUROMOD Working Papers EM2/08, EUROMOD at the Institute for Social and Economic Research.
  2. Peichl, Andreas, 2008. "The Benefits of Linking CGE and Microsimulation Models: Evidence from a Flat Tax Analysis," IZA Discussion Papers 3715, Institute for the Study of Labor (IZA).
  3. repec:ese:iserwp:2009-02 is not listed on IDEAS
  4. Paulus, Alari & Peichl, Andreas, 2008. "Effects of Flat Tax Reforms in Western Europe on Income Distribution and Work Incentives," IZA Discussion Papers 3721, Institute for the Study of Labor (IZA).
  5. Facundo Alvaredo & Emmanuel Saez, 2007. "Income and wealth concentration in Spain in a historical and fiscal perspective," Working Papers halshs-00587714, HAL.
  6. Randjelovic, Sasa, 2013. "Effects of income tax on personal savings: econometric evidence from Serbia," EUROMOD Working Papers EM1/13, EUROMOD at the Institute for Social and Economic Research.
  7. Paulus, Alari & Peichl, Andreas, 2009. "Effects of flat tax reforms in Western Europe," Journal of Policy Modeling, Elsevier, vol. 31(5), pages 620-636, September.

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