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Unveiling the bracket creep: static versus dynamic fiscal drag

dc.contributor.authorArrazola Vacas, María
dc.contributor.authorSanz Sanz, José Félix
dc.date.accessioned2025-06-27T11:47:42Z
dc.date.available2025-06-27T11:47:42Z
dc.date.issued2025
dc.description.abstractThis paper develops a simple model that accurately quantifies the surtax of not indexing the personal income tax schedule(s) in inflationary scenarios and the corrective compensation in case of total or partial indexing. The model is developed for the individual taxpayer and the population aggregate and identifies two different components within the bracket creep, one static, linked to the pre-inflation taxable income, and the other dynamic, associated with changes in the taxable income. Finally, an empirical application of the model to the case of Spain for 2022 is provided. The findings from this empirical analysis demonstrate that the decision not to index the tax schedule will impose an additional tax of over 1,187 million euros on Spanish taxpayers, of which 94% (1,114 million) corresponds to static bracket creep and the remainder (74 million) to the dynamic component. Paradoxically, although the static component is significantly larger, bracket creep continues to be defined in the literature in terms of its dynamic component.
dc.description.departmentDepto. de Economía Aplicada, Pública y Política
dc.description.facultyFac. de Ciencias Económicas y Empresariales
dc.description.facultyInstituto Complutense de Análisis Económico (ICAE)
dc.description.refereedTRUE
dc.description.statusinpress
dc.identifier.essn1617-7134
dc.identifier.issn0931-8658
dc.identifier.officialurlhttps://link.springer.com/journal/712
dc.identifier.urihttps://hdl.handle.net/20.500.14352/121936
dc.journal.titleJournal of Economics
dc.language.isoeng
dc.publisherSpringer
dc.rights.accessRightsopen access
dc.subject.cdu33
dc.subject.jelH20
dc.subject.jelD31
dc.subject.jelD63
dc.subject.keywordbracket creep
dc.subject.keywordinflation
dc.subject.keywordpersonal income tax
dc.subject.ucmEconomía
dc.subject.unesco53 Ciencias Económicas
dc.titleUnveiling the bracket creep: static versus dynamic fiscal drag
dc.typejournal article
dc.type.hasVersionCVoR
dspace.entity.typePublication
relation.isAuthorOfPublicationf428172d-3bb0-4a89-a26c-4f97fb67b333
relation.isAuthorOfPublication.latestForDiscoveryf428172d-3bb0-4a89-a26c-4f97fb67b333

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