Paraísos Fiscales, Wealth Taxation, and Mobility
81 Pages Posted: 21 Aug 2020 Last revised: 16 Mar 2021
Date Written: August 16, 2020
This paper analyzes the effect of wealth taxation on mobility and the consequences for tax revenue and wealth inequality. Using linked administrative data, we exploit the decentralization of the Spanish wealth tax -- after which all regions except Madrid levied positive tax rates. By five years after the reform, the stock of wealthy individuals in Madrid increases by 9%, while smaller tax differentials between other regions do not matter. A theoretical model of evasion and migration rationalizes evasion as the dominant mechanism. Counterfactual simulations show that the tax haven reduces the effectiveness of raising revenue and exacerbates regional wealth inequalities.
Keywords: Wealth Taxes, Mobility, Inequality, Enforcement, Fiscal Decentralization, Tax Havens, Evasion
JEL Classification: E21, H24, H31, H73, J61, R23
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