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A theoretical and practical study on linear reforms of dual taxes

Author

Listed:
  • Samuel Calonge

    () (CREB, Dpt. of Econometrics, Statistics and Spanish Economy, Universitat de Barcelona)

  • Oriol Tejada

    () (Dpt. of Actuarial, Financial and Economic Mathematics, Universitat de Barcelona)

Abstract

We extend the linear reforms introduced by Pf¨ahler (1984) to the case of dual taxes. We study the relative effect that linear dual tax cuts have on the inequality of income distribution -a symmetrical study can be made for dual linear tax hikes-. We also introduce measures of the degree of progressivity for dual taxes and show that they can be connected to the Lorenz dominance criterion. Additionally, we study the tax liability elasticity of each of the reforms proposed. Finally, by means of a microsimulation model and a considerably large data set of taxpayers drawn from 2004 Spanish Income Tax Return population, 1) we compare different yield-equivalent tax cuts applied to the Spanish dual income tax and 2) we investigate how much income redistribution the dual tax reform (Act ‘35/2006’) introduced with respect to the previous tax.

Suggested Citation

  • Samuel Calonge & Oriol Tejada, 2009. "A theoretical and practical study on linear reforms of dual taxes," Working Papers XREAP2009-01, Xarxa de Referència en Economia Aplicada (XREAP), revised Feb 2009.
  • Handle: RePEc:xrp:wpaper:xreap2009-01
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    References listed on IDEAS

    as
    1. Fries, Albert & Hutton, John P & Lambert, Peter J, 1982. "The Elasticity of the U.S. Individual Income Tax: Its Calculation, Determinants and Behavior," The Review of Economics and Statistics, MIT Press, vol. 64(1), pages 147-151, February.
    2. Herwig Immervoll, 2005. "Falling Up The Stairs: The Effects Of "Bracket Creep" On Household Incomes," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 51(1), pages 37-62, March.
    3. Pfahler, Wilhelm, 1984. "`Linear' income tax cuts: distributional effects, social preferences and revenue elasticities," Journal of Public Economics, Elsevier, vol. 24(3), pages 381-388, August.
    4. Hutton, John P. & Lambert, Peter J., 1979. "Income tax progressivity and revenue growth," Economics Letters, Elsevier, vol. 3(4), pages 377-380.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Samuel Calonge & Oriol Tejada, 2011. "A Differential Redistributive Analysis of Bilinear Dual-Income-Tax Reforms," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 67(3), pages 193-224, September.
    2. Antonio Manresa & Ferran Sancho, 2012. "Leontief versus Ghosh: two faces of the same coin," Working Papers XREAP2012-18, Xarxa de Referència en Economia Aplicada (XREAP), revised Oct 2012.

    More about this item

    Keywords

    Dual taxes; linear reforms; Lorenz domination; lattices;

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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