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2018 | OriginalPaper | Buchkapitel

Limits to Redistribution in Late Democratic Transitions: The Case of Spain

verfasst von : Sara Torregrosa Hetland

Erschienen in: Worlds of Taxation

Verlag: Springer International Publishing

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Abstract

This chapter reviews the experience of one country from the European periphery, Spain, in the period 1960 to 1990. It addresses the possibilities to build up an operative welfare state after recent democratization—past the golden age of economic growth in Western economies, and during the second globalization. The new context made it difficult to develop determined redistributive policies where they had been absent before. Economic distress, increasing capital mobility, and new tax ideas challenged the chances of progressive taxation. Furthermore, the recent dictatorship cast long-lasting shadows in the new representative institutions. This study of the Spanish experience is thus an analysis of time-specific and polity-specific constraints on redistribution, which other new democracies might have faced or could encounter in the near future.

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Vorheriges Kapitel Unfairness, Inequality, and Tax Evasion: An Analysis of the Distribution of the Tax Burden in Greece, 1955–1989

See, for example, the opinions expressed in El País, October 2016: http://economia.elpais.com/economia/2016/10/22/actualidad/1477122682_243716.html

All data cited in this paragraph come from Eurostat.

Comín, Reaching a Political Consensus; Pan-Montojo, “Larga e inconclusa transición”; Albi, Hacienda Pública en Democracia. For social expenditures, see Espuelas, Evolución del gasto social. Torregrosa, “Did Democracy…?” offers an evaluation of the redistributive incidence of the old and new systems.

Steinmo, “Evolution of Policy Ideas.”

Lupu and Pontusson, “Structure of Inequality.”

According to Persson and Tabellini, Economic Effects; and Iversen and Soskice, “Electoral Institutions,” proportional systems would favor the introduction of redistributive policies. For studies on the Spanish electoral system and its design, see Gunther, “Electoral Laws”; Montero and Riera, “Sistema electoral”.

Montero, “Vuelta a las urnas.”

The specific dating of the transition to democracy has been the subject of some debate. Franco died in November 1975, but regime change can only be dated to early July 1976, when Adolfo Suárez became prime minister. 1986 signals the first democratic change of party in government, when the Socialists succeeded Suárez’s centrist group.

For more information about him, see Serrano Sanz, “Francisco Fernández Ordóñez.”

Until then, tax evasion was an administrative infraction only. The introduction of tax crime meant that, starting at a given amount, tax evasion could be prosecuted in the criminal courts, and thus lead to a longer prison sentence.

Fernández Ordóñez, España necesaria, 60. Author’s translation. When he wrote “we” he meant the Social Democratic Party.

Non-contributory pensions were introduced in 1990. Currently, whether survivors’ and orphans’ pensions should be funded by general taxation is under discussion.

Elasticity in the context of tax revenues means that public incomes increase when the economy is growing.

Torregrosa, “Sticky Income Inequality”; Torregrosa, “Did Democracy…?” For more information on the data shown in Table 1, see the latter. These impacts would probably be worse if the impact of fraud could be taken into account. Such is the case in the personal income tax; see Torregrosa, “Bypassing Progressive Taxation.” On the other hand, welfare state transfers are not included here; see for them Espuelas, Evolución del gasto social.

The authors of the surveys and reports of the 1970s summarized their results in three popular critiques: unfair distribution of the burden; excessive complexity; and inequitable impact of tax evasion. See Alvira and García, “Límites de Efectos.” My own interpretation adds further points. A more detailed review of these data is available in Torregrosa, “Political Economy.”

For example, in 1975 89 percent of the respondents agreed with progressivity postulates (versus 11 percent who favored a proportional system). Personal income tax was supported by 68 percent as an acceptable revenue method.

Fiscal drag occurs when tax thresholds are fixed in nominal terms and there is high inflation. Increases in nominal incomes drive taxpayers into the higher rates even in the absence of improvements in real purchasing power.

A point made in Lagares, “Aceptación Social.”

For example, Edlund, “Public Attitudes”; Singhal, “Quantifying Preferences.” The relatively pro-redistribution stance taken is confirmed by Fernández-Albertos, “Making of Egalitarian Spain.”

Boeri et al., “Would You Like?”

Cuadernos para el Diálogo, 233, October 15–21, 1977. These words correspond to a conference about the situation of businesses.

Cuadernos para el Diálogo, 216, June 18–24, 1977.

The same conclusion is reached in Pan-Montojo, “Larga e inconclusa transición,” 286.

Albertus and Menaldo, “Gaming Democracy,” discuss the importance of the transition process for new democracies in the sense that redistribution would only come through strongly if the elite’s control had been hampered by revolutionary threat.

Steinmo, “Political Institutions”; Persson et al., “Comparative Politics”; Iversen and Soskice, “Electoral Institutions.”

Fernández-Albertos, “Making of Egalitarian Spain.”

Samuels and Snyder, “The Value of a Vote.”

Gunther, “Electoral Laws;” Lago and Montero, “Todavía no sé quiénes.”

Samuels and Snyder, “The Value of a Vote.” This means that nearly 10 percent of the seats are allocated to districts that would not receive them under proportionality.

Gunther et al., Sistema de partidos.

Comín, Reaching a Political Consensus.

In fact, this may be part of the explanation for the distance between the initial revenue estimate in the project (39,649 million pesetas, of which the government’s objective was to reach 20,000 million pesetas) and the actual revenues in 1978 (8589 million compared to 15,000 million in 1979).

Family allowances, new tax-deductible investments, reduction in imputed incomes from home ownership, and a cap on effective taxation at 40 percent.

Presumptive taxation uses indirect means to approximate the tax base and/or tax liability, instead of being based on calculation of actual incomes. In Spain it is called estimación objetiva and was widely used, resulting in low taxation and regressive results.

Lists of taxpayers corresponding to 1977 and 1978 were on public display at the Ministry of Public Finance in 1979 and 1980, with the press commenting on some dubious cases. These were data from the old, pre-reform tax.

Cuadernos para el Diálogo, 221, July 23–29, 1977.

ABC, December 29, 1977, 51.

Castillo, Fraude fiscal.

From an interview with A. Missé, reproduced in Fuentes Quintana, “Pactos de la Moncloa.” Author’s translation.

El País was quite clear in this respect: “The pressures of the financial sector against the reform and the manifestations of the more conservative flank of business, along with the maneuvers to form a big right-wing party outside UCD, undoubtedly frightened the party’s political cadres and Suárez himself,” El País, Editorial, October 25, 1978.

Fernández Ordóñez, España necesaria, 137. Author’s translation.

Cadastral values can be found in the Public Finance Ministry’s land registry (cadastre). Because of lack of adequate updating, cadastral values in Spain have often been found to be far below the values that the same properties would have if they were on the market. Since real estate property is taxed according to its cadastral value, this means that the tax base remains significantly smaller than the economic capacity it is supposed to capture. Furthermore, such undervaluation will introduce inequities between taxpayers, according to the share of these assets in their portfolios. This is also relevant for the income tax when imputed rents from owner-occupied housing are taxed.

For example, health services, insurance, cars, fashion, wine, perfumes, even shotguns.

Rojo, “Economía española.”

The Left also insisted on increasing minimum pensions to the minimum wage level, annual adjustment to inflation, and improved conditions for agricultural workers.

The main exception was the proposals of the right-wing Alianza Popular, which by 1982 had evolved toward a two-pillar model, with basic-public and complementary-private levels (private institutions also cooperated in the first one too).

In the words of the White Book, the objectives could only be attained “with more active government involvement. But this leads to the need for a more sufficient and progressive tax system. It would be vain to base redistributive action on regressive government contributions” (author’s translation).

Guillén, Construcción política.

Monasterio, “Financiación de las pensiones.”

Bates and Lien, “Note on Taxation”; Persson and Tabellini, “Politics of 1992”; Boix, Democracy and Redistribution; Freeman and Quinn, “Economic Origins.”

Beramendi and Rueda, “Social Democracy Constrained.” Similarly, Genschel, “Globalization, Tax Competition,” contends that, in the absence of international tax competition, taxes are higher and more progressive, with stronger burdens on capital and lower burdens on labor and consumption.

Kopits, “Overview.”

Lasheras, “Percepción social,” 59. Author’s translation.

Slemrod, “Professional Opinions”; Steinmo, “Evolution of Policy Ideas.”

Pan-Montojo, “Larga e inconclusa transición.”

Steinmo, “Political Institutions”; Kato, Regressive Taxation; Lindert, Growing Public. For empirical analyses, see Piketty and Saez, “How Progressive”; Prasad and Deng, “Taxation and Worlds”; Bengtsson et al., “Lifetime versus Annual.”

Timmons, “Fiscal Contract.”

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Titel: Limits to Redistribution in Late Democratic Transitions: The Case of Spain
verfasst von: Sara Torregrosa Hetland
Verlag: Springer International Publishing
Buch: Worlds of Taxation
Print ISBN: 978-3-319-90262-3

Electronic ISBN: 978-3-319-90263-0

Copyright-Jahr: 2018
DOI: https://doi.org/10.1007/978-3-319-90263-0_13