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.
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