Does the Laffer curve exist? A review of the theoretical and applied literature, with special focus on the US and Spain

Journal title ECONOMIA PUBBLICA
Author/s José Torres Remírez, Eduardo Gómez Melero
Publishing Year 2025 Issue 2025/1
Language English Pages 25 P. 7-31 File size 152 KB
DOI 10.3280/EP2025-001001
DOI is like a bar code for intellectual property: to have more infomation click here

Below, you can see the article first page

If you want to buy this article in PDF format, you can do it, following the instructions to buy download credits

Article preview

FrancoAngeli is member of Publishers International Linking Association, Inc (PILA), a not-for-profit association which run the CrossRef service enabling links to and from online scholarly content.

The Laffer Curve, which illustrates the relationship between tax rates and fiscal revenue, has been a central theme in economic theory and fiscal policy since its formulation. This article provides a comprehensive review of the literature on the Laffer Curve, with a particular focus on the elasticity of the tax base as a tool for its analysis. The elasticity of the tax base refers to the sensitivity of fiscal revenue to changes in tax rates and is crucial for understanding how variations in taxation impact economic behavior and, consequently, public revenue. The study compares empirical evidence from the United States and Spain to offer a detailed perspective on how these economies respond to changes in tax rates. Through a comparative analysis, it highlights similarities and differences in the response of the tax base and the efficiency of tax collection. This article provides an integrated view of the applicability and limitations of the Laffer Curve in different national contexts, offering practical implications for policymakers and contributing to the debate on optimizing tax revenue.

Keywords: optimal taxation, income, efficiency, taxpayer behavior. First submission: 7 August 2024, accepted: 19 December 2024

Jel codes: H0, H21, H39

  1. Torres Chacón J.L. (2008). La curva de Laffer: Estimación para la economía española, Analistas Económicos de Andalucía, 2
  2. Arrazola M., de Hevia J., Romero D. & Sanz Sanz J.F. (2014). Personal Income Tax Reforms and the Elasticity of Reported Income to Marginal Tax Rates: An Empirical Analysis Applied to Spain.
  3. Badenes Plá N. (2001). IRPF, eficiencia y equidad: Tres ejercicios de Microsimulación. Investigación Instituto de Estudios Fiscales, 1.
  4. Baker D. (2014). The Big Tax Increase Nobody Noticed (No. 2014-15). Center for Economic and Policy Research (CEPR).
  5. Diamond P. & Saez E. (2013). Gravar las rentas altas. In: J. Byrne (Dir.). Occupy Wall Street. Manual de Uso (pp. 323-336). Barcelona: Ed. RBA Libros.
  6. Díaz M. (2004). Las respuestas de los contribuyentes ante las reformas del IRPF, 1987-1994. Tesinas del CEMFI, 405.
  7. Diaz Caro C. & Onrubia J. (2015). Elasticidades de la renta gravable y costes de eficiencia en el IRPF dual. Estudio sobre la Economía Española, 2.
  8. Eisenstein L. (2023). Las ideologías de la imposición. Santiago de Chile, Chile: Ediciones Olejnik.
  9. Feldstein M. (1996). How big should government be?. National Bureau of Economic Research, Working Paper 5868.
  10. Fuentes Quintana (1986). Hacienda Pública y Sistemas Fiscales. Madrid: Universidad Nacional de Educación a Distancia.
  11. Giertz S., Saez E. & Slemrod J. (2012). The elasticity of taxable income with respect to marginal tax rates: A critical review. Journal of Economic Literature, 3-50.
  12. Gruber J. & Saez E. (2002). The elasticity of taxable income: evidence and implications. Journal of Public Economics, 84(1): 1-32.
  13. Heijman W.J.M. & van Ophem J.A.C. (2005). Willingness to pay tax. The Laffer curve revisited for 12 OECD countries. The Journal of Socio-Economics, 34(5): 714-723.
  14. Laffer A. (2004). The Laffer Curve: Past, Present and Future. Executive summary backgrounder: The Heritage Foundation, 1765: 1-16.
  15. López García E. (2012). La curva de Laffer: Aplicación al caso español con perspectiva espacial. Universidad de Oviedo
  16. Lorenzo J. (2017). Razonamiento estadístico: una experiencia de enseñanza del concepto de regresión a la media. Cuadernos de Educación, 15: 192-205.
  17. Mirrlees J. & Adam S. (2011). Tax by design: The Mirrlees review (Vol. 2). Oxford University Press.
  18. Onrubia J. & Rodado M.C. (2014). Presión Fiscal en España. Análisis de la presión Fiscal por niveles de renta en España, 2009-2011. Intermón Oxfam.
  19. Romanov D. (2004). The corporation as a tax shelter. Evidence from recent Israeli tax changes. Discussion Paper No. 2004.17, Bank of Israel.
  20. Sánchez de la Cruz D. (2021). Liberalismo a la madrileña. Cómo y por qué Madrid se ha convertido en la comunidad que más crece, más empleo genera, mejores servicios públicos ofrece, más recauda y más baja los impuestos. España: Editorial Deusto.
  21. Sanmartín J. (2007). El efecto de los cambios en los tipos marginales sobre la base imponible del IRPF. Hacienda Pública Española, 182: 9-27.
  22. Sanz Sanz J.F. (2014). Looking Inside the Laffer Curve: Microfoundations and empirical evidence applied to complex tax structures. Documentos de Trabajo FUNCAS (752/2014).
  23. Slemrod J. (1998). Methodological issues in measuring and interpreting taxable income elasticities. National Tax Journal, 773-788.
  24. Torres-Remírez J., Ramírez Franco L.D. & Sánchez Andrés D. (2024). Curva de Laffer: El caso de las Comunidades Autónomas de España (2010-2019). Revista de Análisis Económico, 39(2): 107-136.
  25. Trabandt M., & Uhlig H. (2011). The Laffer curve revisited. Journal of Monetary Economics, 58(4): 305-327.
  26. Trabandt M., Uhlig H. (2013). How Do Laffer Curves Differ Across Countries?. In A. Alesina y F. Giavazzi (eds.). Fiscal Policy after the Financial Crisis. The University of Chicago Press, pp. 211-249.
  27. Wanniski J. (1978). Taxes, revenues and the “Laffer Curve”. The Public Interest, 3-16
  28. Werdt C. (2015). The elasticity of taxable income for Germany and its sensitivity to the appropriate model. Discussion Paper No. 2015/5.

José Torres Remírez, Eduardo Gómez Melero, Does the Laffer curve exist? A review of the theoretical and applied literature, with special focus on the US and Spain in "ECONOMIA PUBBLICA " 1/2025, pp 7-31, DOI: 10.3280/EP2025-001001