Ability to pay adjusted by the cost of living in the Spanish personal income tax

• Autores: Laura Varela-Candamio, Jesús López-Rodríguez
• Localización: XXI Encuentro Economía Pública, 2014, pág. 38
• Idioma: inglés
• Enlaces
  • Texto completo (pdf)
• Resumen

  • This paper defines and evaluates a new tax method based on the combination of a flat rate scheme and increasing personal allowances on the tax base which we refer to as Discretionary Income Tax Method (DITM) against the traditional personal income tax based on progressive tax schedules. The results show from a theoretical perspective that our proposal is more progressive and social welfare enhancing. For the empirical validation of our results we carry out an exercise comparing the Spanish personal income tax (SPIT) with our tax method alternative (DITM). The results of our empirical exercise are in line with the theoretical predictions of the �objective taxation� here described and derived from the comparison of the two tax methods.