IDEAS home Printed from https://ideas.repec.org/a/bej/issued/v4y2001i1badenes.html
   My bibliography  Save this article

Allowances: Are Really Better than Tax Credits?

Author

Listed:
  • Nuria Badenes-Plá
  • Julio López-Laborda
  • Jorge Onrubia Fernández

Abstract

In this paper we develop an analytical framework devoted to compare family size related tax credits and allowances. As a main result, we obtain that, in a social welfare context à la Atkinson and Bourguignon (1987), if tax credits and allowances are compared in an individual context, it could be assured that a progressive income tax with family size related tax allowances is never welfare superior to an equal-yield income tax involving tax credits. Theoretical results are checked on empirical grounds for the Spanish personal income tax (IRPF) in force in 1999. We develop a micro-simulation exercise, using the Panel of IRPF Returns, which belongs to the Institute of Fiscal Studies. Two results can be derived from this exercise. Firstly, that, both adopting an individual or household approach, allowances and tax credits are welfare superior to an equal-yield proportional tax. And secondly, that, although a tax credit system reduces global income inequality more than what allowances does, also from an individual or household approach, it is not possible to determine superiority in welfare terms of a system over the other.

Suggested Citation

  • Nuria Badenes-Plá & Julio López-Laborda & Jorge Onrubia Fernández, 2001. "Allowances: Are Really Better than Tax Credits?," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco, vol. 4(1), September.
    • Handle: RePEc:bej:issued:v:4:y:2001:i:1:badenes
    as

    Download full text from publisher

    File URL: http://www.beje.decon.ufpe.br/v4n1/badenes.htm
    File Function: Full text
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nuria Badenes-Plá & Julio López-Laborda, "undated". "Taxing on Housing: A Welfare Evaluation of the Spanish Personal Income Tax," Studies on the Spanish Economy 143, FEDEA.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bej:issued:v:4:y:2001:i:1:badenes. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jose Ricardo Nogueira (email available below). General contact details of provider: https://edirc.repec.org/data/dufpebr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.