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Flat tax reforms: a general equilibrium evaluation for Spain

Author

Listed:
  • 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.

Suggested Citation

  • Marta González-Torrabadella & Josep Pijoan-Mas, 2006. "Flat tax reforms: a general equilibrium evaluation for Spain," Investigaciones Economicas, Fundación SEPI, vol. 30(2), pages 317-351, May.
  • Handle: RePEc:iec:inveco:v:30:y:2006:i:2:p:317-351
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Andreas PEICHL, "undated". "The Benefits of Linking CGE and Microsimulation Models - Evidence from a Flat Tax analysis," EcoMod2008 23800106, EcoMod.
    2. Alari PAULUS & Andreas PEICHL, "undated". "Effects of Flat Tax Reforms in Western Europe on Equity and Efficiency," EcoMod2008 23800105, EcoMod.
    3. 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.
    4. 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.
    5. Peichl, Andreas, 2009. "Benefits and problems of linking micro and macro models - evidence from a flat tax analysis," ISER Working Paper Series 2009-02, Institute for Social and Economic Research.
    6. Facundo Alvaredo & Emmanuel Saez, 2007. "Income and wealth concentration in Spain in a historical and fiscal perspective," Working Papers halshs-00587714, HAL.

    More about this item

    Keywords

    Income tax; heterogeneous agents; general equilibrium;

    JEL classification:

    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models

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