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Fiscal Drag in Europe: Key Facts

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  • Mathias Dolls
  • Esteban García-Miralles
  • Max Lay
  • Andreas Peichl

Abstract

Key MessagesIn 21 EU countries, tax-to-base (TTB) elasticities mostly range from 1.7 to 2: tax burdens tend to respond similarly to nominal income growtTTB elasticities tend to be highest for labor income, followed by capital income and pensions and benefitsFiscal drag reduces the progressivity of the tax system, with lower-earnings groups facing higher TTB elasticitiesIn 2019–23, about one-third of the countries analyzed only partially offset fiscal dragIn these countries, tax revenue in 2023 was higher than in a scenario with full indexation

Suggested Citation

  • Mathias Dolls & Esteban García-Miralles & Max Lay & Andreas Peichl, 2026. "Fiscal Drag in Europe: Key Facts," EconPol Policy Brief 82, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    • Handle: RePEc:ces:econpb:_82
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    File URL: https://www.ifo.de/DocDL/EconPol_PolicyBrief_82_0.pdf
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