Simplification and Decentralization of the Income Tax
This article presents a new type of welfare-improving tax reform model aimed at simultaneously achieving simplification and decentralization of the personal income tax. This model is based on the results of PfÃ¤hler and Dardanoni and Lambert and comprises two elements. The first one is the transformation of the income tax into an equal-yield flat tax. The second one is a reduction of the central taxation in proportion to posttax income in order to vacate a space that may be utilized by subcentral jurisdictions through a surcharge applied on the central tax liability. The theoretical proposal is illustrated with a microsimulation exercise on the Spanish personal income tax.
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