ON THE DISTRIBUTIVE AND INCENTIVE EFFECTS OF THE SPANISH INCOME-TAX -A COMPARISON OF 1980 AND 1994

This paper examines the distributive and incentive effects of reforms to personal income tax that have been undertaken in Spain since the 19 78 act. It analyzes the effects that would have been observed if no ch ange other than that purely due to modifications to income tax had tak en place. This is done by simulating the impact of the income tax syst em in two years (1980 and 1994) over a constant population - that of t he Spanish household survey 1980-81. The 'distributive' effect is asse ssed through the average tax burden by deciles of household post-tax i ncome, and the 'incentive effect' is evaluated by means of the distrib ution of households by intervals of effective marginal tax rate. The r esults indicate that in a world in which income tax obligations were f ulfilled, the 1994 system (uprated according to the consumer price ind ex to 1980 levels) would have been more progressive than than that of 1980. This increase in progressivity would have been accompanied by a very substantial increase in the number of households subject to a hig her marginal tax rate, and by a rise in tax collection. (C) 1997 Elsev ier Science B.V.