This article presents a new type of welfare-improving tax reform model aimed at simultaneously achieving simplification and decentralization of the personal income tax. This model is based on the results of Pfähler and Dardanoni and Lambert and comprises two elements. The first one is the transformation of the income tax into an equal-yield flat tax. The second one is a reduction of the central taxation in proportion to posttax income in order to vacate a space that may be utilized by subcentral jurisdictions through a surcharge applied on the central tax liability. The theoretical proposal is illustrated with a microsimulation exercise on the Spanish personal income tax.
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