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

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.(c) 2023 Elsevier B.V. All rights reserved.