The Hidden Effects of Inflation. An Examination of Bracket Creep and its Implications for the Income Tax: Evidence for Spain (1979-1987)
This paper examines the impact of inflation on the income tax in Spain from 1979 to 1987. By introducing a new approach using dynamic microsimulation and the Elasticity of Taxable Income (ETI), we analyze three dimensions of the tax: revenue, progressivity, and redistribution. The microsimulation reveals that the lack of adjustment of the income tax to inflation: 1) accounts for 44% of the increas