The «Reverse Bracket-Creep Effect» in Wealth Taxation: Variable Regional Wealth Tax Credits and the Joint Limitation of the Temporary Solidarity Tax on Large Fortunes

Abstract

This paper analyses the effects arising from the interaction between the variable Wealth Tax credits enacted by certain Spanish Autonomous Communities and the joint limitation applicable to Personal Income Tax, Wealth Tax and the Temporary Solidarity Tax on Large Fortunes. Based on an examination of the relevant state and regional legislation, the paper identifies a phenomenon whereby an increase in wealth may result in a lower effective Wealth Tax burden, referred to as a «reverse bracket-creep effect». The study examines the legal origin of this anomaly, analyses its impact on the effective progressivity of wealth taxation and critically assesses its compatibility with the constitutional principles of ability to pay, equality and tax progressivity.