A Theoretical and Practical Study on Linear Reforms of Dual Taxes

XREAP 2009-01

45 Pages Posted: 3 May 2011

See all articles by Samuel Calonge

Samuel Calonge

University of Barcelona

Oriol Tejada

University of Barcelona

Date Written: February 20, 2009

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.

Keywords: Dual taxes, linear reforms, Lorenz domination, lattices

Suggested Citation

Calonge, Samuel and Tejada, Oriol, A Theoretical and Practical Study on Linear Reforms of Dual Taxes (February 20, 2009). XREAP 2009-01, Available at SSRN: https://ssrn.com/abstract=1825120 or http://dx.doi.org/10.2139/ssrn.1825120

Samuel Calonge (Contact Author)

University of Barcelona ( email )

Gran Via de les Corts Catalanes, 585
Barcelona, 08007
Spain

Oriol Tejada

University of Barcelona ( email )

Gran Via de les Corts Catalanes, 585
Barcelona, 08007
Spain

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