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Behavioral responses to wealth taxes: Evidence from the Spanish Survey of Household Finances

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  • Jakurti, Edison
  • Süssmuth, Bernd

Abstract

This paper provides an empirical analysis of the re-introduction of the wealth tax in Spain. Using the Spanish Survey of Household Finance, we employ the difference-in-differences method to estimate the behavioral responses to the re-introduction of the wealth tax in 2011. Due to non-compliance, we are able to estimate the intention-to-treat effects which show that, over a six-year period, on average, the wealth tax reduced taxable wealth by about 42% to 51%. To distinguish between real and avoidance responses, we show evidence that part of this reduction could be attributed to portfolio composition shifts in favor of tax-exempt assets. These results could inform policy regarding both the potential of wealth taxation in reducing wealth concentration and inequality, and the loopholes that might undermine it.

Suggested Citation

  • Jakurti, Edison & Süssmuth, Bernd, 2023. "Behavioral responses to wealth taxes: Evidence from the Spanish Survey of Household Finances," Economics Letters, Elsevier, vol. 223(C).
    • Handle: RePEc:eee:ecolet:v:223:y:2023:i:c:s0165176523000010
    DOI: 10.1016/j.econlet.2023.110976
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    References listed on IDEAS

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    1. Arun Advani & Hannah Tarrant, 2021. "Behavioural responses to a wealth tax," Fiscal Studies, John Wiley & Sons, vol. 42(3-4), pages 509-537, September.
    2. Juliana Londoño-Vélez & Javier Ávila-Mahecha, 2021. "Enforcing Wealth Taxes in the Developing World: Quasi-experimental Evidence from Colombia," American Economic Review: Insights, American Economic Association, vol. 3(2), pages 131-148, June.
    3. Philip Vermeulen, 2016. "Estimating the Top Tail of the Wealth Distribution," American Economic Review, American Economic Association, vol. 106(5), pages 646-650, May.
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    6. Katrine Jakobsen & Kristian Jakobsen & Henrik Kleven & Gabriel Zucman, 2020. "Wealth Taxation and Wealth Accumulation: Theory and Evidence From Denmark," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(1), pages 329-388.
    7. David Seim, 2017. "Behavioral Responses to Wealth Taxes: Evidence from Sweden," American Economic Journal: Economic Policy, American Economic Association, vol. 9(4), pages 395-421, November.
    8. José María Durán-Cabré & Alejandro Esteller-Moré & Mariona Mas-Montserrat, 2019. "Behavioural responses to the (re)introduction of wealth taxes. Evidence from Spain," Working Papers 2019/04, Institut d'Economia de Barcelona (IEB).
    9. José M Durán-Cabré & Alejandro Esteller Moré, 2021. "A Quantitative Assessment of the Net Wealth Tax: The Spanish Experience [Income and Wealth Concentration in Spain from a Historical and Fiscal Perspective]," CESifo Economic Studies, CESifo Group, vol. 67(4), pages 488-510.
    10. David R. Agrawal. & Dirk Foremny & Clara Martinez-Toledano, 2020. "Paraísos Fiscales, Wealth Taxation, and Mobility," Working Papers halshs-03093674, HAL.
    11. José Mª Durán Cabré & Alejandro Esteller Moré, 2007. "An empirical analysis of wealth taxation: Equity vs. tax compliance," Working Papers 2007/1, Institut d'Economia de Barcelona (IEB).
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    Cited by:

    1. Kuypers, Sarah & Figari, Francesco & Verbist, Gerlinde, 2024. "Vertical and horizontal equity of wealth taxes: An assessment from a joint income-wealth perspective," Economics Letters, Elsevier, vol. 234(C).

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    More about this item

    Keywords

    Wealth tax; Behavioral responses; Taxable wealth; Difference-in-differences; Spain;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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