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Reported Taxable Income and Marginal Tax Rates: Evidence for Spain Based on the Fiscal Drag

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  • Jorge Onrubia?Fernández & José Félix Sanz?Sanz

Abstract

This paper quantifies the taxable income-marginal tax rate elasticities associated with Spanish Personal Income Tax. To that effect, according to Saez (2003), the fiscal drag between 1993 and 1994 was used as an instrument to identify the changes in the taxable income induced by changes in the marginal tax rates. The paper comes to the conclusion that income level, marital status and the tax declaration framework for married couples are determining factors of the fiscal response to changes in the marginal tax rates. Likewise, irregular income significantly increases the responses of taxpayers. The obtained elasticities suggest the existence of efficiency costs higher than those obtained by the traditional literature based exclusively on earned income.

Suggested Citation

  • Jorge Onrubia?Fernández & José Félix Sanz?Sanz, 2009. "Reported Taxable Income and Marginal Tax Rates: Evidence for Spain Based on the Fiscal Drag," Department of Economics - Working Papers Series 1075, The University of Melbourne.
    • Handle: RePEc:mlb:wpaper:1075
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Díaz-Caro, Carlos & Onrubia, Jorge, 2018. "How do taxable income responses to marginal tax rates differ by sex, marital status and age? Evidence from Spanish dual income tax," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 12, pages 1-25.
    2. Iris Claus & John Creedy & Josh Teng, 2012. "The Elasticity of Taxable Income in New Zealand," Fiscal Studies, Institute for Fiscal Studies, vol. 33(3), pages 287-303, September.
    3. Miguel Almunia & David Lopez-Rodriguez, 2019. "The elasticity of taxable income in Spain: 1999–2014," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 10(3), pages 281-320, November.
    4. Carlos Díaz Caro & Jorge Onrubia Fernández, 2015. "Elasticidades de la renta gravable y costes de eficiencia en el IRPF dual," Studies on the Spanish Economy eee2015-02, FEDEA.
    5. John Creedy, 2009. "The Elasticity of Taxable Income:," Department of Economics - Working Papers Series 1085, The University of Melbourne.
    6. Iris Claus & John Creedy & Josh Teng, 2012. "The Elasticity of Taxable Income in New Zealand," Fiscal Studies, Institute for Fiscal Studies, vol. 33(3), pages 287-303, September.
    7. 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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    More about this item

    Keywords

    Personal income tax; taxable income elasticity; excess burden; fiscal drag.;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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