Facundo Alvaredo
email: alvaredo@pse.ens.fr

Emmanuel Saez
email: saez@econ.berkeley.edu

Tony Atkinson

Orazio Attanasio

Luis Ayala

Olympia Bover

Samuel Calonge

Juan Carluccio

Francisco Comín

Carlos Gradín

Jorge Onrubia

Cesar Perez

Thomas Piketty

Leandro Prados De La Escosura

Javier Ruiz-Castillo

Jesús Ruiz-Huerta

Mercedes Sastre

Rafael Vallejo Pousada

Income and wealth concentration in Spain in a historical and fiscal perspective

Keywords: Income concentration, top incomes, behavioral response D3, H2, N3, O1 Income Concentration, top incomes, behavioral response

This paper presents series on top shares of income and wealth in Spain over the 20 th century using personal income and wealth tax return statistics. Top income shares are highest in the 1930s, fall sharply during the first two decades of the Franco dictatorship, and have increased slightly since the 1960s, and especially since the mid-1990s. The top 0.01% income share in Spain estimated from income tax data is comparable to estimates for the United States and France over the period 1933-1971. Those findings, along with a careful analysis of all published tax statistics, suggest that income tax evasion and avoidance among top income earners in Spain before 1980 was much less prevalent than previously thought. Wealth concentration has been about stable from 1982 to 2004 as surging real estate prices have benefited the middle class and compensated for a slight increase in financial wealth concentration in the 1990s. We use our wealth series and a simple conceptual model to analyse the effects of the wealth tax exemption of stocks for ownersmanagers introduced in 1994. We show that the reform induced substantial shifting from the taxable to tax exempt status. This shifting has eroded the wealth tax base substantially and hence the tax exemption has generated large efficiency costs.

Introduction

The evolution of income and wealth inequality during the process of development has attracted enormous attention in the economics literature. A number of recent studies have constructed series for shares of income accruing to upper income groups for various countries using income tax statistics. Most of those studies are gathered in a volume edited by [START_REF] Atkinson | Top Incomes over the Twentieth Century: A Contrast Between European and English Speaking Countries[END_REF]. The countries studied are Anglo-Saxon countries (United Kingdom, Ireland, United States, Canada, New Zealand and Australia) and continental European countries (Finland, France, Germany, Netherlands, Sweden, and Switzerland) and large Asian countries (China, India, Indonesia, and Japan). No such study has analyzed Southern European countries. This paper proposes to start filling this gap by analyzing the Spanish experience.

Spain is an interesting country to analyze on several grounds. First, there are very few studies on the evolution of inequality in Spain from a historical perspective. A number of studies have analyzed the evolution of income, earnings and expenditure inequality over the last three decades using survey data. Research has also been done using income tax data for recent years. 1 Survey-based studies point to a reduction in income or expenditure inequality in the 1970s followed by relative stability in the 1980s and 1990s, while tax-based results display a worsening in the distribution of income in [START_REF][END_REF][START_REF] Castañer | El Efecto Redistributivo del IRPF 1982-1988[END_REF]and 1995[START_REF] Ruiz-Castillo | A Simplified Model for Social Welfare Analysis. An Application to Spain, 1973-74 to 1980-81[END_REF][START_REF] Garde | Los Estudios sobre Distribución de la Renta en España: Fuentes, Resultados, Perspectivas de Futuro[END_REF], provide a survey of the literature until 1995. 2 More recently, Prados de la Escosura, 2006a[START_REF] De | Inequality, poverty, and the Kuznets curve In Spain, 1850-2000[END_REF] has constructed long historical series on income inequality such as ratios of GDP per capita to low skill wages or average wages, as well as industry wage differentials. Those estimates are not based 1 Those studies, which include [START_REF] Castañer | El Efecto Redistributivo del IRPF 1982-1988[END_REF][START_REF] Lasheras | Política Redistributiva en el IRPF entre 1982 y 1990[END_REF][START_REF] Ayala | La Distribución de la Renta en España según Datos Fiscales[END_REF][START_REF] Rodríguez | The Spanish Progressive Income Taxation Evidence[END_REF], focus primarily on the redistributive power of the income tax. They estimate global inequality indices such as Gini before and after taxes and do not specifically focus on top income groups as we do here. 2 For key studies on income inequality in Spain over the last decades, see [START_REF] Inchausti | La Renta Nacional en España y su Distribución[END_REF], 1974[START_REF] Feldstein | Tax Avoidance and the Deadweight Loss of the Income Tax[END_REF], Alcaide and Alcaide, 1974[START_REF] Alcaide | Distribución Personal de la Renta en España y otros Países de la OECD[END_REF][START_REF] Alcaide | Distribución Personal de la Renta Española en 1980[END_REF][START_REF] Alvarez | La Distribución Funcional y Personal de la Renta en España[END_REF][START_REF] Ayala | La Distribución de la Renta en España según Datos Fiscales[END_REF][START_REF] Ayala | La Movilidad de Ingresos en España[END_REF][START_REF] Ayala | La Distribución de la Renta en España en los años ochenta: una Perspectiva Comparada[END_REF][START_REF] Bosch | Evolución de la Desigualdad y la Pobreza en España[END_REF][START_REF] Budría | Economic Inequality in Spain: The European Community Household Panel Dataset[END_REF][START_REF] Cordero | La Distribución Personal de los Salarios en 1982 y 1986[END_REF], Del Río and Ruiz-Castillo, 2001a,b, Escribano, 1990[START_REF] Febrer | Wage Distribution in Spain, 1994-1999. An Application of a Flexible Estimator of Conditional Distributions[END_REF][START_REF] Goerlich | Inequality in Spain 1973-91: Contribution to a regional Database[END_REF], 2004[START_REF] Gradín | Polarization by Sub-populations in Spain, 1973-91[END_REF][START_REF] Gradín | Polarization and Inequality in Spain: 1973-91[END_REF][START_REF] Martín-Guzmán | Encuesta de Presupuestos Familiares[END_REF][START_REF] Oliver I Alonso | Anatomía de la Distribución de la Renta en España, 1985-1996: La Continuidad de la Mejora[END_REF][START_REF] Pascual | Factores determinantes de la distribución personal de la renta: un estudio empírico a partir del PHOGHE[END_REF][START_REF] Ruiz-Castillo | La medición de la pobreza y la desigualdad en España[END_REF] on micro-data but offer the best evidence to date on inequality trends in Spain from a historical perspective. Therefore, our study can be seen as the first serious attempt at compiling systematic and long run series of income concentration using primarily individual tax statistics, a source that has not been fully exploited by previous studies. It is also important to note that our series measure only top income (or wealth) concentration and hence are silent about changes in the lower and middle part of the distribution. As a result, our series can very well follow different patterns than broader measures of inequality such as Gini coefficients or macro-based estimates, an important point we will emphasize throughout.

Second, up to the 1950s, Spain was still largely an agricultural economy with a GDP per capita around $4,000 (in today dollars) similar to developing countries such as Pakistan or Egypt today. 3 Indeed, because of the civil war shock and the poor economic performance during the first two decades of the Franco dictatorship, Spain GDP per capita did not reach the peak of 1929 before 1951. Starting in the 1950s and following economic liberalization and openness to trade, economic growth resumed at a very quick pace. Today, Spain's GDP per capita is only about 20% lower than GDP per capita of the largest western European economies such as France, Germany, or the United Kingdom. Therefore, it is quite interesting to analyze income concentration during the stagnation years and during the economic boom starting in the late 1950s to re-assess the link between economic development and income concentration.

Third, Spain has undergone dramatic political changes since the 1930s. Spain was a republic from 1931 to 1939. A progressive government first ran the republic from 1931 to 1933, followed by a conservative government from 1933 to 1935, when some reforms of the previous years were abandoned. The reformist parties returned to power in 1935; however, the division between the advocates of the democratic changes and those 1998, [START_REF] Ruiz-Castillo | Desigualdad y bienestar en España en términos reales: 1973-74, 1980-81 y 1990-91[END_REF]. A summary of the key findings can be found in the appendix. 3 Prados de la Escosura, 2003[START_REF] De | Growth And Structural Change In Spain, 1850-2000[END_REF]Escosura, , 2007a has constructed historical GDP and growth series for Spain. He emphasizes that, before the economic stagnation of the 1930-1952 period, Spain experienced significant economic growth since 1850, in particular from 1850-1883 and in the 1920s. [START_REF] Maddison | The World Economy. A Millennial Perspective[END_REF][START_REF] Maddison | The World Economy[END_REF] also reproduces those historical series of real GDP per capita in Spain in his international compilation.

supporting a revolutionary process became evident soon. A military coup lead by General Franco, followed by a three year long civil war, transformed Spain into a dictatorship from 1939 till the death of Franco in 1975. Since then, Spain has returned to democracy and was run from 1982 to 1996 by the Socialist party, which tried to implement progressive policies such as the development of progressive income and wealth taxation, and of a welfare state with universal health coverage. The study of top income and wealth shares in Spain can cast light on the effects of the political regime and economic policies on inequality and concentration.

Finally, over the last twenty years, Spain has implemented large income and wealth tax reforms among which sharp reductions in top income marginal tax rates. Spain has also modified the wealth tax base by exempting corporate stocks and business assets for corporate and business owners actively involved in managing the business in 1994. Our constructed top income and wealth shares can be used to cast light on the effects of taxation on the economic and tax avoiding behavior of the affluent. We propose a detailed application in the case of the 1994 wealth tax exemption.

Our results show that income concentration was much higher during the 1930s than it is today. The top 0.01% income share estimated from reported incomes was about twice higher in the 1930s than over the last two decades. The top 0.01% income share fell sharply during the first two decades of the Franco dictatorship, and has increased slightly since the 1970s, and especially since the mid-1990s. Interestingly, both the level and the time pattern of the top 0.01% income share in Spain is fairly close to comparable estimates for the United States [START_REF] Piketty | Income Inequality in the United States, 1913-1998[END_REF] and France [START_REF] Piketty | Les hauts revenus en France au 20 eme siecle -Inegalites et redistributions, 1901-1998[END_REF][START_REF] Piketty | Income Inequality in France 1901-1998[END_REF] over the period , especially the post-World War II decades. Those findings, along with a careful analysis of all published tax statistics as well as a re-evaluation of previous academic work on income tax evasion in Spain, leads us to conclude that income tax evasion and avoidance in Spain before 1980 was much less prevalent than previously thought at the top of the distribution. As a result, those income tax statistics are a valuable primary data source for analysing income concentration.

Over the last two decades, top income shares have increased significantly due to an increase in top salaries and a surge in realized capital gains. The gains, however, have been concentrated in the top percentile (and especially the top fractiles within the top percentile) with little changes in income shares of upper income groups below the top percentile. Financial wealth concentration has also increased in the 1990s due to a surge in stock prices, which are held disproportionately by the wealthy. However, real estate prices have increased sharply as well. As real estate wealth is less concentrated than financial wealth, on net, top wealth shares (including both financial and real estate wealth) have declined slightly during the period 1982-

2002.

The data show that the wealth tax exemption of stocks for ownermanagers since 1994 has gradually and substantially eroded the wealth tax base, especially at the very top: by 2002, the top 0.01% wealth holders could exempt about 40% of their wealth because of this exemption. We develop a simple conceptual model to explain this phenomenon, which we estimate using our wealth series. Our empirical results show evidence of very strong shifting effects whereby wealthy business owners were able to re-organize their business ownership and activities in order to take advantage of the reform. This suggests that this tax exemption both reduced the redistributive power of the progressive wealth tax and created substantial deadweight burden as business owners were taking costly steps to qualify for the exemption. The case study of the wealth tax exemption illustrates how our series can be used to cast light on the evaluation of tax policy reforms.

The paper is organized as follows. Section 2 describes our data sources, outlines our estimation methods, and discusses the issue of income tax evasion in Spain. In Section 3, we present and analyze the trends in top income shares since 1933 as well as the composition of top incomes since 1981. Section 4 focuses on top wealth shares and composition since 1982.

Section 5 uses the wealth series to analyze the efficiency costs of the wealth tax exemption of 1994. Finally, Section 6 offers a brief conclusion. The complete details on our data and methods, as well as the complete sets of results are presented in appendix.4

Data, Methodological Issues, and Context

Data and Series Construction

Our estimates are from personal income and wealth tax return statistics compiled by the Spanish fiscal administration for a number of years from 1933 to 1971 and annually from 1981 on. The statistical data presented are much more detailed for the 1981-2004 period than for the older period. Because the received wisdom is that the individual income tax was poorly enforced, especially in the pre-1981 period, we will discuss in great detail this issue in Section 2.2 and throughout the text in Section 3. Complete details on the methodology are provided in appendix.

Before 1981, because of very high exemption levels, only a very small fraction of individuals had to file individual tax returns and therefore, by necessity, we must restrict our analysis to the top 0.1% of the income distribution (and for 1933-1949 even the top 0.01%). From 1981 on, we can analyze the top 10% of the income distribution. Spain has adopted an annual personal wealth tax since 1978. Detailed statistics on the 'new' income and wealth tax have started to be published in 1981 and 1982 respectively. 5 The progressive wealth tax has high exemption levels and only the top 2% or 3% wealthiest individuals file wealth tax returns. Thus, we limit our analysis of wealth concentration to the top 1% and above, and for the period 1982 to Our top groups are defined relative to the total number of adults (aged 20 and above) from the Spanish census (not the number of tax returns actually filed). For example, in 2004, there are 30,718,000 adults in Spain (excluding Pais Vasco and Navarra) and hence the top 1% represents the top 307,180 tax filers, etc. The Spanish income tax is individually based since 1988 (although joint filing remains possible, it is always advantageous to file separately when both spouses have incomes). Before 1988, the Spanish income tax was family based. We correct our estimates for 1981-1987 using the micro-data (which allow to compute both family and individual income after the reform) in order to account for this change in law. 6 We define income as gross income before all deductions and including all income items reported on personal tax returns: salaries and pensions, selfemployment and unincorporated business net income, dividends, interest, other investment income and other smaller income items. Realized capital gains are also included in the tax base since 1979 (but were excluded from the base in the earlier period). In order to create comparable series before and after 1979, we also estimate series excluding capital gains for the period 1981-2004. Our income definition is before personal income taxes and personal payroll taxes but after employers' payroll taxes and corporate income taxes.

The wealth tax is a progressive tax on the sum of all individual wealth components net of debts with a significant top rate of 2.5% in the top bracket for very large wealth holdings. 7 In general, real estate wealth is not taxed according to its market value but according to its registry value ("catastro") for property tax purposes. Market prices are about 2 to 3 times as high as registry value on average. Real estate wealth is a very large component of wealth in Spain. Therefore, we use two definitions of wealth, one including real estate wealth evaluated at market prices and one excluding real estate wealth (and excluding also mortgage debt on the passive side) which we call financial wealth. Total wealth is clearly a better measure of wealth but is not directly measured in the wealth tax statistics and hence requires making large 6 The old income tax was based on individual income from 1933 to 1939 and based on family income from 1940 on. We do not correct estimates for the 1940-1971 period because, at the very top of the distribution, we expect spouses' incomes to be small during that period where very few married women worked. 7 The wealth tax has always been individually based and not family based.

adjustments. Financial wealth is a more narrow definition of wealth but it is better measured in tax statistics.

Our main data consist of tables displaying the number of tax returns, the amounts reported, and the income or wealth composition for a large number of income brackets. As the top tail of the income distribution is very well approximated by Pareto distributions, we can use simple parametric interpolation methods to estimate the thresholds and average income levels for each fractile. This method follows the classical study by [START_REF] Kuznets | Shares of Upper Income Groups in Income and Savings[END_REF] has been used as well as in all the top income studies presented in [START_REF] Atkinson | Top Incomes over the Twentieth Century: A Contrast Between European and English Speaking Countries[END_REF] In the case of Spain, a very large cross-section of individual micro tax data over sampling high incomes is available for year 2002. A 2 percent panel of tax returns is also available from 1982 to 1998. Therefore, we use the micro data to check the validity of our estimations based on published tax statistics. We find that our tabulations based estimates are almost always very close (within 2-5 percent) to the micro-data based estimates, giving us confidence that the errors due to interpolation are fairly modest. 8In order to estimate shares of income, we need to divide the income amounts accruing to each fractile by an estimate of total personal income defined ideally as total personal income reported on income tax returns had everybody been required to file a tax return. Because only a fraction of individuals file a tax return (especially in the pre-1979 era), this total income denominator cannot be estimated using income tax statistics and needs to be estimated using National Accounts 9 and the GDP series created by Prados de la Escosura, 2003 for the pre-1979 period. For the recent period 1981-2004, we approximate the ideal income denominator as the sum of (1) total wages and salaries (net of social security contributions) from National Accounts, (2) 50% of Social Transfers from National Accounts (as pensions, which represent about half of such transfers, are taxed under the income tax), (3) 66.6% of unincorporated business income from National Accounts (as we estimate that about 1/3 of such business income is from the informal sector and hence escapes taxation), (4) all capital income reported on tax returns (as capital income is very concentrated, non-filers receive a negligible fraction of capital income 10 ). Our denominator for the 1981-2004 period is around 66% of Spanish GDP (excluding Pais Vasco and Navarra) with small fluctuations across years, which is comparable to other studies in [START_REF] Atkinson | Top Incomes over the Twentieth Century: A Contrast Between European and English Speaking Countries[END_REF]. For the pre-1979 period, because there are no detailed personal income series in the National Accounts series constructed by Prados de la Escosura, we define our denominator as 66% of GDP. 11 We proceed similarly to compute wealth shares. In that case, we use estimates of aggregate financial net wealth and real estate wealth from the Bank of Spain.

Table 1 gives thresholds and average incomes for a selection of fractiles for Spain in 2004. As just mentioned, the average income is estimated primarily from National Accounts and hence is largely independent of our tax statistics 12 and hence not biased downwards because of tax evasion or avoidance.

After analyzing the top share data, we turn to the composition of income and wealth. Using published information and a simple linear interpolation method, we decompose the amount of income for each fractile into employment income, entrepreneurial income (self-employment and small business income), capital income, and capital gains (we also check the accuracy of our estimation using the micro-tax data for the years when the micro-data is available). We divide wealth into real estate (net of mortgage 9 Using tax returns to compute the level of top incomes and national accounts to compute the total income denominator dates from the famous Kuznets' study (1953) on American inequality. This method is also used is most of the studies compiled in Atkinson and Piketty, 2007. 10 For example, in 2002, the top 10% income earners (representing about one fifth of all tax filers as only about half of adults file taxes) obtained 65% of total capital income reported on tax returns. Capital income in personal income in National Accounts is substantially different from capital income on tax returns because of imputed rents of homeowners, imputed interest to bank account holders, returns on (non-taxable) pension funds, etc. That is why we use capital income from tax returns to define our denominator. See e.g. [START_REF] Park | Comparison of BEA Estimates of Personal Income and IRS Estimates of Adjusted Gross Income[END_REF], for a comprehensive comparison in the case of the United States where over 90% of adults file tax returns. 11 We take into account the exclusion of Navarra since 1937 and that of Alava since 1943. 12 It is important to note that average incomes are low because they include a large number of non working adults (such as non working wives or students) with either no or very small individual incomes who rely on other family members' income. debt), fixed claim assets, corporate stocks, and other components (net of non mortgage debts).

The issue of Tax Avoidance and Evasion

Income tax data have hardly been used before to study income concentration, especially prior to 1979, because there is a widely held view that income tax evasion in Spain was very high, and that consequently, the income tax data vastly under-estimate actual incomes. 13 A careful analysis of the income tax statistics shows that evasion and avoidance in Spain at the very top of the distribution during the first decades of existence of the tax was most likely not significantly higher than it was in other countries such as the United States or France. It is therefore critical to understand the roots of this widely held view, which is based on two main arguments.

First, very few individuals were paying income tax and the individual income tax was raising a very small amount of revenue relative to GDP.

Second, the administration did not have the means to enforce the income tax, especially when the exemption thresholds were significantly reduced in the 1960s, and when tax filers could very easily exaggerate their deductions to avoid the tax.

The first argument is factually true as only about 1,500 individuals paid taxes in 1933 (about 0.01% of all adults), and throughout the 1950s and 1960s the number of taxpayers rarely exceeded 40,000 (about 0.2% of all adults). Combined with relatively low tax rates (except at the very top brackets), it is therefore not surprising that the income tax was only raising between 0.03% of GDP in 1933 and 0.22% of GDP in 1978. 14 However, extremely high exemption levels can very well explain such facts even in the absence of tax evasion. Indeed, in 1933, the filing threshold was 100,000 13 Comín, 1994 and Comín and Zafra Oteyza, 1994 provide a historical account on the issues of fiscal fraud and tax amnesties over the last century in Spain; [START_REF] Fuentes | Fraude y Amnistías Fiscales en la España Contemporánea, 1940-1990[END_REF] focuses on the period 1940-1990. For the view that income tax evasion was very high in the pre-1979 period, see Breña Cruz et al. 1974, Castillo Lopez, 1992, Instituto de Estudios Fiscales, 1973, Martí Basterrechea, 1974.. 14 We report in appendix Pesetas, that is, 66 times the average income per adult (equal to around 1,500 Pesetas based on our denominator estimation described in Section 2.1). 15 Our series will show that income concentration based on those tax statistics was very high in the 1930s (about twice as high as in recent decades), and actually not much lower than levels estimated for the United States or France. Therefore, there is no reason to believe that the number of filers and income reported at the very top are unreasonably low.

The second argument that enforcement was poor also needs to be qualified. It is undoubtedly true that the 1964-1967 income tax reform that eliminated the high exemption levels failed to transform the income tax into a mass tax as the fiscal administration kept using de facto high exemption levels and did not try to make taxpayers with incomes below 200,000 or even 300,000 Pesetas pay the tax [START_REF] Martí Basterrechea | El Impuesto General sobre la Renta de las Personas Físicas[END_REF]. However, there are three main reasons to believe that enforcement for very top taxpayers remained acceptable under the old income tax for most of the period for which we have data. First, historically, early progressive income tax systems always use very high exemption levels and therefore only a very small fraction of the population at the top was liable for the tax. The rationale for using income taxes on the very rich only is precisely because, at the early stages of economic development with substantial economic activity taking place in small businesses with no verifiable accounts, it is much easier to enforce a tax on a small number of easily identifiable individuals. The rich are identifiable because they are well known in each locality and they derive their incomes from large and modern businesses with verifiable accounts, or from highly paid (and verifiable) salaried positions, or property income from publicly known assets (such as large land estates with regular rental income). 16 Therefore, the small size of the Spanish income tax is due to the fact that it 15 For further comparisons, in 1933, the annual salary of a qualified officer to the government statistics bureau was 4,000 pesetas, while a high-ranking postal service employee received 11,000 pesetas per year (Gaceta de Madrid, 12/31/1933). 16 [START_REF] Seligman | The Income Tax[END_REF] is the classical reference on the history of early income taxes. The studies gathered in Atkinson and Piketty, 2007 all show that the early income taxes in Western countries were limited to a small number of tax filers. All those studies show that income concentration measures derived from those early income tax statistics are always very high suggesting that enforcement of the income tax on the rich was acceptable. The case of Japan, which started an income tax in 1887 shows that a pre-industrial economy significantly was a tax limited to the very rich and should not be interpreted as the consequence of poor enforcement. 17 Indeed, official statistics show that the administration was able to audit a very significant fraction of individual tax returns in the pre-1960 period. The audit rates were on average around 10-20% and hence significantly higher than today (see Table F2 andTable F3 in appendix). It is likely that audit rates were even higher for the top 2,000 income earners in the top 0.01%.

Second, when the progressive income tax was started, Spain had already set in place schedule income taxes on wages and salaries, rents, corporate profits, business profits, and capital income. 18 As a result, most of the income components of the rich were already being taxed through those schedule taxes, which offered an alternative way to verify the incomes of the rich. 19 Furthermore, like France, Spain also adopted and used presumptive income taxation based on external signs of wealth (such as ownership of cars, planes, or yachts, or employment of domestic workers) in cases where the administration suspected tax evasion or avoidance. 20 Third, the administration also threatened to make public the list of taxpayers in order to shame prominent tax evaders (Albiñana, 1969a). Such less advanced than Spain in the 1930s could successfully enforce a tax on the rich [START_REF] Moriguchi | The Evolution of Income Concentration in Japan, 1886-2005: Evidence from Income Tax Statistics[END_REF]. The Spanish case seems to follow this general pattern as well. 17 In the discussions leading to the creation of the income tax during 1932, it was recognized that enforcement would be acceptable only if the exemption threshold was chosen high enough. The parliamentary debates show that, although some congressmen considered that the exemption level was too high, it was recognized that the tax authority lacked both the managerial capabilities and the necessary human resources to administer a broader income tax [START_REF] Vallejo Pousada | El Impuesto sobre la Renta en España: antecedentes y evolución hasta 1978[END_REF]. Most Western countries broadened their income tax during extraordinary events such as the World Wars, and this required a very large administrative effort. 18 The time series of the revenue raised by each of those schedule taxes are compiled is reported in appendix Table G. 19 Crosschecking of income tax returns with the schedule income tax returns did take place, as stated, for instance, in [START_REF] Albiñana | La Inspección del Impuesto sobre la Renta de las Personas Físicas[END_REF]and Gota Losada, 1966. Starting in 1933, the administration prepared personal listings with information from all schedule taxes in order to identify individuals with very high incomes. Along the same lines, in 1940 the government launched the 'Registro de Rentas y Patrimonios,' (Registry of Income and Wealth) in which information from personal wealth was gathered with the aim of assisting income tax audits. Additionally, the high level of land ownership concentration allowed local tax authorities to identify large estate proprietors and rents for rural rent tax purposes (see, for instance, [START_REF] Carrión | Los Latifundios en España. Su Importancia. Origen. Consecuencias y Solución[END_REF], 1973[START_REF] Alvarez Rey | Reforma y Contrareforma Agraria durante la Segunda República. Carmona 1931-1936[END_REF]. 20 According to [START_REF] Albiñana | La Inspección del Impuesto sobre la Renta de las Personas Físicas[END_REF], Castillo Lopez, 1992[START_REF] Martí Basterrechea | El Impuesto General sobre la Renta de las Personas Físicas[END_REF], extraordinary deductions were among the main sources for tax evasion after the reform of 1964-1967. Tax statistics report the amount of extraordinary deductions, which are only around 5% of income in the late 1950s. Our series are estimated based on income before deductions and thus are not biased downwards due to excessive deductions. lists were published for tax years 1933, 1934, and 1935 in the official state bulletin. Those lists show that virtually all the largest aristocratic real estate owners among the 'Grandes de España' (the highest nobility rank), were taxpayers, demonstrating that the traditional aristocracy could not evade entirely the income tax. 21Contemporaneous observers (Albiñana 1969a,b, Gota Losada, 1970) suggest that enforcement deteriorated during the last decade of Franco's regime. 22 This view is based primarily on the fact that the 1964-1967 reform virtually eliminated exemptions and transformed the income tax in a mass tax, linked to schedule taxes. In practice however, the income tax remained a tax on very high incomes only as the mass tax was not enforced. Therefore, a much more accurate statement is that the Spanish income tax could not become a mass tax (as this happened in most Western countries around the mid-20 th century) without a significant administrative effort that the Franco regime never seriously attempted, hence giving the impression that the tax was primitive and poorly enforced relative to other countries. 23 However, this does not mean that the Spanish income tax was not properly enforced on very top incomes, and most of the hard evidence that we have been able to gather points toward enforcement levels and techniques for the very top of the distribution, that were comparable to those used in other countries. First, the highest income concentration occurs in the 1930s. The top 0.01% share was around 1.5% and about twice as high as in the recent period. This finding is not surprising as Spain was a country with low average income and with high concentration of wealth and, in particular, land ownership.24 However, lack of any statistics on income or wealth concentration made this claim impossible to establish rigorously. The use of the old income tax statistics demonstrates that Spanish income concentration was indeed much higher in the pre-civil war period than it is today. 25Interestingly, tax statistics providing the composition of reported top incomes show that taxpayers in 1941 (representing the top 0.03%) obtained about 20% of their income from returns on real estate (rents), 35% from returns on financial assets, 25% from non farm business income, 5% from farm business income, and about 15% from employment income (see Table H in appendix). This suggests that, at the beginning of the Franco regime, only a minority of top income earners were passive landowners deriving all their income from rents (the traditional image of the agrarian aristocracy of the 'Grandes de España,' mainly concentrated in the central and southern areas of the country). Top income earners were much more likely to be also owners of financial assets and non-farm businesses.

Top Income Shares and Composition

Top Income Shares

Second, the old income tax statistics display a large decrease in the top 0.01% income share from 1.4% 1941 to 0.6% in the early 1950s, during the first decade of the Franco dictatorship. We have argued in Section 2.2 that there is no compelling hard evidence suggesting a deterioration of enforcement at the very top of the distribution and, therefore, we conclude that the poor economic management and the turn toward economic autarchy did not benefit top incomes and actually reduced income concentration in Spain. By 1953, the composition of top incomes had changed significantly relative to 1941: the fraction of non-farm business income has dropped from 26% to 9% while the fraction of farm business income has increased from less than 5% to over 20%. 26 This suggests that the closing of the Spanish economy in the 1940s lead to a sharp reduction in successful non-farm business enterprises and as a result, non-farm business owners were replaced by large farm business owners at the top of the distribution.

Third, top income concentration estimated with income tax statistics remains around 0.6% from 1953 to 1971, the last year for which old income tax statistics are available, suggesting that the high economic growth starting the 1950s did not bring a significant change in income concentration.

Interestingly, the level of income concentration measured with the new income tax statistics in the early 1980s is quite similar to the level of 1971.

Assuming again a constant level of enforcement from 1971 to 1981, this suggests that the transition from dictatorship to democracy was not associated with a significant change in income concentration. Comparing the change in income composition in the top 0.05% from 1961 to 1981 is interesting: in the capital income category, there is a dramatic shift away from did not find compelling arguments showing that enforcement at the top was particularly poor in the 1930s. real estate to financial assets and in the business income category, there is a dramatic shift away from farm income toward non farm business income. This shows that the very fast economic expansion from 1961 to 1981 made traditional land and farm owners fall behind other business owners at the top of the distribution. Our top income share series show, however, that such a shift took place with no change in overall income concentration.

Finally, Figure 2 shows that there are fluctuations in very top income concentration since 1981 with sharp increases in the late 1980s and the late 1990s. At the peak of 2000, top 0.01% income earners captured 0.86% of total income while they earned only 0.53% of total income in 1993.

In light of our discussion in the introduction about the specific economic and political trajectory of the Spanish economy relative to other western countries analyzed previously, it is interesting to compare the trends in income concentration between Spain and other countries. Figure 3 displays the top 0.01% income share in Spain, France (from [START_REF] Piketty | Les hauts revenus en France au 20 eme siecle -Inegalites et redistributions, 1901-1998[END_REF][START_REF] Landais | Les hauts revenus en France (1998-2006): Une explosion des inegalités?[END_REF], and the United States [START_REF] Piketty | Income Inequality in the United States, 1913-1998[END_REF]. Two points are worth noting.

First, Spain starts with a level of income concentration in the 1930s that is slightly lower than France or the United States. However, income concentration in France and the United States falls more sharply than in Spain during World War II. Therefore, from the mid-1940s to 1971, income concentration across the three countries is actually strikingly close. 27 This shows that the number of high income taxpayers is not inherently too low in Spain relative to other countries and supports our claim that enforcement at the top of the distribution was plausibly comparable across Spain and other Western countries. Second, although income concentration has increased in Spain in recent decades, this increase is very small relative to the surge experienced by top incomes in the United States. Thus, the Spanish 26 The share of capital income from financial assets drops slightly from 36% to 29% and the share of labor income increases slightly from 13% to 19% from 1941 to 1953. 27 The series are estimated using similar methodologies across countries although there are of course differences in the details. However, it is important to note that the denominator (as a fraction of GDP) is comparable across countries and around 60% to 65%. It is actually slightly higher in Spain (66% of GDP) than in France (around 60% of GDP on average).

experience is actually closer to the one of continental Europe countries such as France than Anglo-Saxon countries such as the United States. 28

Detailed analysis since 1981

The tax statistics since 1981 are much more detailed than the old income tax statistics. Thus, we can study larger income groups such as the top 10% since 1981.

Figure 4 displays top income shares for three groups within the top decile: the bottom half of the top decile (top 10-5%), the next 4% (top 5-1%), and the top percentile. In contrast to Figure 2, we now include realized capital gains in the top income shares. 29 The figure shows that those top income shares have evolved quite differently: the top 1% increased very significantly from 7.7% in 1981 up to 10.2% in 2004. In contrast, the top 10-5%, and the top 5-1% shares actually slightly declined from 1981 and in 2004, with very modest fluctuations throughout the period. Therefore the increase in income concentration, which took place in Spain since 1981, has been a phenomenon concentrated within the top 1% of the distribution. This result could not have been derived from survey data, which have too small samples and top coding issues to reliably study the top 1%.

Figure 5 illustrates this concentration phenomenon further by splitting the top 1% into three groups: the top 1-0.5%, the top 0.5-0.1%, and the top 0.1%. As in Figure 4, the higher the fractile, the higher the increase in the share from 1981 to 2004: the top 1-0.5% increases modestly from 2.7 to 2.9 percent while the top 0.1% increases sharply by over 80% from 2 to 3.6 percent.

In order to understand the mechanisms behind this increase in income concentration at the top, we next turn to the analysis of the composition of top incomes. 28 The studies gathered in [START_REF] Atkinson | Top Incomes over the Twentieth Century: A Contrast Between European and English Speaking Countries[END_REF] show that Anglo-Saxon countries experienced a dramatic increase in income concentration in recent decades while continental European countries experiences either no or small increases in income concentration. 29 To a large extent, realized capital gains were not taxed (and hence not reported) under the old income tax. Therefore, for comparison purposes, we also excluded realized capital gains in Figures 2 and3 income share is due solely to two components: realized capital gains and wage income. The remaining two components: business income and capital income have stayed about constant. The figure shows also that the 1986-1988 spike was primarily a capital gains phenomenon. In contrast, the wage income increase has been a slow but persistent effect, which has taken place throughout the full period. Capital gains tend to be volatile from year to year as they follow closely the large swings of the stock market. Indeed, Figure 7 displays the total real amounts of capital gains reported by the top 1% income earners along with the Madrid SE stock index from Global Financial data on a log scale from 1981 to 2004. The two series are strikingly correlated.

Therefore, the capital gain component reflects largely stock market fluctuations. High-income individuals own a disproportionate fraction of corporate stock in the economy. When stock prices increase sharply as in the late 1980s or late 1990s, high incomes get a disproportionate share of the corresponding capital gains, explaining why top income shares tend to follow the stock market cycles.

Top Wealth Shares and Composition

In order to cast light on the capital income component of the income concentration series we discussed, we now turn to top wealth shares estimated from the wealth tax statistics. Figure 9 displays the evolution of average wealth (total net worth of the household sector divided by the total number of individuals aged 20 and above) and its composition from 1981 to 2004. Those average wealth statistics come solely from National Accounts and are hence fully independent from wealth tax statistics. Three elements should be noted. First, wealth has increased very quickly during that period, substantially faster than average income: average wealth in 2004 is 2.4 times higher than in 1982 while average income in 2004 is only 1.5 times higher than in 1982. Second, real estate is an extremely large fraction of total wealth. It represents about 80% of total wealth throughout the period. Third and related, the growth in average wealth has been driven primarily by real estate price increases, and to a smaller degree by an increase in corporate stock prices. In contrast, fixed claim assets have grown little during the period.

Figure 10 displays the composition of wealth in top fractiles of the wealth distribution in 1982 and 1999. As one would expect, the share of real estate is declining and the share of stocks is increasing as we move up the wealth distribution. It is notable that real estate still represents over 60% of wealth for the bottom half of the top percentile. Thus, only the very rich hold a substantial share of their wealth in the form of stock holdings. The patterns in 1982 and 1999 are quite similar except that the level of stock ownership is higher across the board in 1999, a year with high stock market prices. Those compositional patterns suggest that an increase in real estate price will benefit relatively less the very top and should therefore reduce the very top wealth shares. In contrast, an increase in stock prices will benefit disproportionately the very rich and should increase the very top wealth shares.

Figure 11 displays the top 1% wealth share (net worth including real estate wealth) along with the top 1% financial wealth share (net worth excluding real estate wealth and mortgage debts). Unsurprisingly, the top financial wealth share is larger than the top wealth share because financial wealth is more concentrated than real estate wealth. Top financial wealth concentration is stable around 25% from 1982 to 1990, decreases to about 21% from 1990 to 1995 and then increases again to about 26% by 2004. In contrast the top 1% wealth share including real estate is much more stable and fluctuates within a narrow band between 16 and 18 percent. In contrast to financial wealth, total wealth concentration does not fall from 1990 to 1995 because, as shown on Figure 9, real estate wealth also falls in that period, and this advantages top wealth holders. The reverse happens from 1995 to 2004: in contrast to financial wealth, total wealth concentration does not increase because real estate prices increase sharply.

Figure 12 decomposes the top 1% total wealth share into three groups: the top 0.1%, the next 0.4%, and the bottom half of the top percentile. The graph shows that those top wealth groups have experienced different patterns. The top 0.1% share has fallen substantially from 8% in 1982 to 5% by 2004. In contrast, the top 1-0.5% has increased from 4.3 to 5.2 percent and the top 0.5-0.1% has slightly decreased from 7.6 to 7.2 percent. Those differential patterns are due primarily to composition effects: the bottom groups in the top percentile hold mostly real estate and have benefited from the surge in real estate prices. In contrast, the top 0.1% has been hit by the sharp real estate prices increases from 1986 to 1991 (see Figure 9). The improvement in real estate prices from 1997 to 2004 has been compensated by a surge in stock prices leading to an overall flat pattern for the top 0.1% wealth share during this period.

Figure 13 displays the wealth composition of top 0.1% wealth holders from 1982 to 2004. It shows that the shares of real estate, business assets, and fixed claim assets have been decreasing and that the share of stocks has been increasing but not enough to compensate for the fall in the other components. Therefore, over the last two decades, the dramatic increase in real estate prices has been the primary cause of the reduction in the concentration of wealth in Spain.

In 2002 the Bank of Spain conducted a household wealth survey whose preliminary results are presented in [START_REF] Bover | Encuesta Financiera de las Familias Españolas (EFF): Descripción y Métodos de la Encuesta de 2002[END_REF]. It is instructive to compare the wealth reported on wealth tax returns with the wealth reported in the survey. The complete comparison is reported in Table E3 in the appendix.

Three important findings emerge.

First, we find that wealth reported on wealth tax statistics for top income groups such as the top 1% is higher than the wealth reported on the survey by the top 1%, even under the assumption that all the household wealth belongs to the head of household. For example, including real estate, the average top 1% wealth from tax returns is 1.8 million Euros while it is only 1.2 million in the survey. This shows that, in contrast to popular belief, it is not clear that tax evasion for the wealth tax is pervasive as wealthy individuals seem to report more wealth for tax purposes than for the survey purposes.

Second, the total wealth reported in the survey (and especially financial wealth) is substantially lower than the aggregates from National Accounts that we use as the denominator. For example, the survey reports total wealth of about 2,000 billion Euros while National Accounts report total wealth of about 3,000 billions Euros. This suggests that households are under-reporting their wealth in the survey or that the survey might not have been sampled adequately to reflect a fully representative cross section of Spanish households.

Finally, because the gap in the aggregate between the survey and National Accounts and the gap for top groups between the survey and the wealth tax data are of comparable magnitude, our top wealth shares computed using wealth tax statistics and National Accounts for the denominator are relatively close to the top wealth shares computed internally from the survey (using as denominator total survey wealth).

The Erosion of the Wealth Tax Base

In 1994, an exemption for business owners substantially involved in the management of their business was introduced in the wealth tax. More precisely, stocks of corporations where the individual owns at least 15%, or the individual and family own at least 20%, and where the individual is substantially engaged in this business activity (getting over 50% of his labor and business income from this activity) is exempted from the wealth tax. The value of those stocks still has to be reported to the fiscal administration and was included in our top wealth share series. The exemption was introduced in December 1993 for the first time, affecting wealth held by the end of 1994 (reported in 1995). Importantly for the empirical analysis below, the exemption criteria were relaxed for tax year 1995 (when the individual ownership requirement was lowered from 20% to 15%) and in tax year 1997 (when the 20% family ownership criteria was introduced). 30

Conceptual Model

In principle, the 1994 wealth tax reform could have two effects. First, the tax cut for exempted business might spur business activity in the exempted sector. We call this effect the supply side effect. Second, the tax cut for exempted business might induce some businesses, which did not originally meet the exemption criteria, to shift to the exempt sector in order to benefit from the tax cut. For example, business owners could increase their share of stock in the company in order to meet the 15% ownership threshold.

Alternatively, they might become active managers in their businesses or drop other work activities outside the business. A business owner would be willing to shift to the exempt sector as long as the costs of shifting are less than the tax savings. We call this effect the shifting effect. In this subsection, we construct a simple model to capture those two effects and we propose an empirical application using our constructed wealth series in the following subsection. 31 We assume that business owners have an objective function of the form ! c " h(z) where ! z is pre-tax profits, ! c is net-of-tax profits, and ! h(z) is an increasing and convex function representing the costs of earning higher profits. Those costs represent labor input costs (including the labor supply cost of the business owner if he is an active manager) and also capital input costs. The quasi-linear form of the objective function amounts to assuming away income effects or risk aversion effects, which simplifies the derivations 30 For tax year 2003 (beyond our study), the individual ownership requirement was further reduced from 15% to 5%. 31 To the best of our knowledge, such a model has not been presented before in the literature on the efficiency costs of taxation. It could be easily applied to other tax settings. For example, in the United States, the issue of shifting business profits from the corporate income tax base to the individual income tax base has received a lot of attention (see e.g., [START_REF] Slemrod | Income Creation or Income Shifting? Behavioral Responses to the Tax Reform Act of 1986[END_REF][START_REF] Slemrod | High Income Families and the Tax Changes of the 1980s: the Anatomy of Behavioral Response[END_REF][START_REF] Gordon | Are Real Responses to Taxes Simply Income Shifting Between Corporate and Personal Tax Bases?[END_REF][START_REF] Saez | Reported Incomes and Marginal Tax Rates, 1960-2000: Evidence and Policy Implications[END_REF]. Such shifting occurs because businesses meeting specific criteria (number of shareholders) can elect to be taxed directly at the individual level.

and the welfare analysis. 32 Furthermore, we assume that the business owner can pay a cost ! q " 0 in order to meet the tax exemption status. Such costs represent for example the costs of increasing the business ownership to 15% or the opportunity costs of dropping outside work activities to meet the labor income requirement. We assume that ! q is distributed according to a cumulated distribution ! P(q) . A fraction ! P 0 = P(q = 0) of businesses meet those criteria even in the absence of the tax preference. In reality, businesses differ in size, which could be modeled through heterogeneity in the cost function h(z) . However, as we consider only linear taxation (which is an approximation to the actual progressive tax system), the distribution of business sizes is irrelevant for the analysis and hence we assume that businesses differ only in ! q.

!
We assume that the tax rate on profits ! z in the taxed sector is ! " 0 and that the tax rate in the exempt sector is

! " 1 with of course ! " 1 # " 0 . Note that ! " 1
is not necessarily zero as the business also faces corporate and individual income taxes. It is also important to note that we convert the wealth tax rate The manager solves the following maximization problem:

! max l,z z(1" # l ) " h(z) " q $ l
This maximization problem can be decomposed into two stages. First,

conditional on ! l, ! z maximizes ! z(1" # l ) " h(z) which generates the first order condition ! 1" # l = h'(z)
. This equation captures the within sector supply side effect, as a decrease in ! " l leads to an increase in ! z l with an elasticity

! e l = 1" # l ( ) z l ( ) $z l $ 1" # l ( ) = h'(z l ) z l h'' z l ( ) ( ) .
32 Including income effects would not change the qualitative nature of our findings but would complicate the presentation, as we would have to introduce compensated elasticities to capture efficiency costs in our formulas. In the case of wealthy business owners who actively work in their business, it seems plausible to assume that income effects are small (if income effects were large, those business owners would not be working).

Second, the business chooses ! l. We denote by

! V l = max z z 1" # l ( ) " h(z)
[ ] the indirect utility in each taxable status

! l = 0, 1 (not including the cost ! q of becoming tax exempt). Therefore, if ! q " V 1 # V 0 , then the exempt status ! l = 1 is optimal, while if ! q > V 1 " V 0 , then ! l = 0 is optimal. As a result, a fraction ! P * = P(V 1 " V 0 )
of businesses chooses the exempt status.

Using the envelope theorem, we have

! "V l "# l = $z l . Therefore, ! "P * "# 0 = p V 1 $ V 0 ( ) % z 0 and ! "P * "# 1 = $ p V 1 $ V 0 ( ) % z 1 , where ! p q
( ) denotes the density of the distribution ! P q ( ) . Unsurprisingly, if there are firms on the margin between the tax exempt and taxable status, then increasing the tax ! " 0 in the taxable sector generates a shift toward the tax-exempt sector. Conversely, reducing the tax advantage of the exempt sector by increasing ! " 1 reduces the number of firms in the tax-exempt sector.

We denote by ! T = 1" P * ( ) # 0 z 0 + P * # 1 z 1 the total tax revenue and by

! W = 1" P * ( ) V 0 + V 1 " q ( ) d 0 V 1 "V 0 # P q
( ) the private surplus in the economy. Social surplus is

! SW = W + T . Routine computations show that: ! "T "# 0 = 1$ P * ( ) z 0 1$ # 0 1$ # 0 e 0 $ p * 1$ P * # 0 z 0 $ # 1 z 1 ( ) % & ' ( ) * (1) ! "T "# 1 = P * z 1 1$ # 1 1$ # 1 e 1 + p * P * # 0 z 0 $ # 1 z 1 ( ) % & ' ( ) * (2)
The first term (equal to one) inside the square brackets of ( 1) and ( 2)

represents the mechanical increase in tax revenue absent any behavioral response. The last two terms inside the square brackets represent the loss of tax revenue due to the supply side effect and the shifting effect respectively.

The reduction in private surplus due to the tax change is equal to the mechanical tax increase (absent behavioral responses). 33 Therefore, the last two terms represent the net effect on social surplus SW of the tax increase or equivalently (minus) the marginal deadweight burden of increasing taxes. If the tax rate ! " 0 in the taxable sector is below the Laffer rate maximizing tax revenue (when taking into account only supply side effects) then ! " 0 z 0 > " 1 z 1 . Therefore, equation (1) shows that shifting effects increase the marginal deadweight burden of increasing the tax in the taxable sector. In contrast, equation [START_REF] Castillo López | El Fraude Fiscal en España[END_REF] shows that shifting effects decrease the marginal deadweight burden of increasing the tax in the exempt sector. The economic intuition is transparent: increasing the tax differential across the two sectors leads to more shifting: the marginal shifters spend ! q for a tax saving equal to ! q, which is pure deadweight burden. Strikingly, in the extreme case where

Absent shifting effects

! " 1 = 0, 34 ! "SW "# 1 = p * # 0 z 0 P * : social surplus increases with an increase in ! " 1
no matter how large the supply side effect in the tax exempt sector is.

Therefore, providing a wealth tax exemption for businesses meeting some specific set of criteria has two opposite effects on social surplus. First, it has a positive effect on social surplus through the standard supply side effect: exempt businesses face lower taxes and hence might expand their economic activity. This effect is measured through the supply side elasticity ! e. This leads to an increase in business activity and hence reported business wealth in the exempt sector with no effect on the taxable sector. Second, however, the exemption might induce some businesses to shift to the exempt status and waste resources in doing so. This shifting effect leads to an increase in reported business wealth in the exempt sector, which comes at the expense of reported business wealth in the taxable sector. We propose an empirical estimation using our wealth composition series below.

Empirical Estimation

33 This can be seen directly from the fact that ! "V l "# l = $z l , which is a direct consequence of the envelope theorem. 34 As we discussed above, even though business owners benefiting from the exemption are exempt from the wealth tax, business owners still pay income taxes on the profits so that in reality ! " 1 > 0. response to the introduction of the exemption. 35 The fraction of business exempt wealth grows enormously from 1994 to 2002, which is consistent either with a very large supply side effect or a significant shifting effect.

However, the fraction of taxable closely held stocks shrinks significantly from 1994 to 2002 which strongly suggests that the great increase in tax exempt wealth comes, at least in part, at the expense of taxable wealth through the shifting channel. We use our series to quantify the relative size of each effect.

We propose a simple quantitative analysis using our estimated series and the model described above. Let us assume that, taking the tax or exempt status as fixed, business wealth is given by

! z = z 1" # ( ) e
where ! " is the total tax rate (including income and wealth taxes) on profits, ! e is the supply side elasticity, and ! z is potential wealth absent any taxes. We assume that the fraction of businesses in the tax-exempt sector is given by For a given top group (such as the top 1% or the top 0.01%), after the reform, we observe exempt closely held stocks

! P = P " 0 ," 1 ( ) . We
! P a z a 1" # 0 ( ) e
and non-exempt 35 Those would be businesses for which the cost of shifting ! q was zero because the businesses already met the criteria.

closely held stock

! 1" P a ( )z a 1" # 1 ( ) e
. Before the reform, we observe only the total closely held stocks held by the top group

! P b z b 1" # 0 ( ) e + 1" P b ( )z b 1" # 0 ( ) e
as there is no distinction between taxable and exempt stock.

We estimate ! " 0 and ! " 1 as the sum of the income tax on profits and the wealth tax. We assume that the income tax on profits (corporate income tax if the business is incorporated or individual income tax is the business is unincorporated and taxed directly at the individual level) is 30% for the top 1%

wealth holders and 40% for top 0.01% holders. We assume that the wealth tax rate (when the business is taxable) is 0.8% of the value of assets for the top 1% and 1.3% for the top 0.01%. 36 We convert wealth tax rates into an implicit tax on profits assuming a return rate on assets equal to 5%.

Therefore, the total tax rates on profits for non-exempt businesses are 46% and 66% for the top 1% and top 0.01% respectively. Although there is significant uncertainty about the exact tax rates, they only affect the In order to estimate the three key parameters need to take into account the fact that the wealth tax exemption criteria were 36 Those estimates are based on the tabulated data. The wealth tax rates go from 0.2% in the lowest bracket to 2.5% in the top bracket but the effective tax rates are substantially lower due to numerous exemptions. 37 A counter argument could be that business owners did not know about the wealth tax exemption in the first year after the reform and hence failed to claim it even in cases where they were fully eligible. This argument is difficult to believe in the case of large wealth holders who use tax accountants to file their taxes. More broadly, the costs of learning about complex tax exemptions can be incorporated into the cost ! q of meeting the exemption criteria and our model and results would go through unchanged.

relaxed in 1995 and in 1997. Therefore, we assume that the growth in the fraction exempt from 1994 to 1995 and from 1996 to 1997 is entirely due to the relaxation of the criteria (and hence that the fraction exempt would have stayed constant absent the relaxation). This is a very conservative estimation as the fraction exempt grows in every single year from 1994 to 2002. As a result, we assume that the fraction exempt (before the reform) is actually about twice as large as the fraction actually exempt in 1994. This conservative assumption leads to a conservative estimate of the shifting effect.

Second, we assume that, absent any tax change, total closely held stocks (taxable and non-taxable) would have grown at a rate ! g equal to the growth rate of other financial assets held by the top 1%. In that case, ! z a = (1+ g) " z b where ! 1+ g is taken as the ratio of other financial assets held by the top 1% after and before the reform. This is clearly a strong assumption.

Using our pre-reform series, we show that it holds as a first approximation in the pre-reform period. 38 Panel A of Table 2 presents 2) as well as evaluate the tax and efficiency consequences (Panel C in Table 2). Three important results arise from this exercise. First and most important, all the estimates robustly suggest that there is a very large shifting effect: the fraction of businesses benefiting from the exemption jumps from less than 1/3 to about 2/3 for the top 1%. The shifting is even more extreme for the top 0.01% and goes from 37% exempt to over 80% exempt. It is important to reiterate that this represents the pure shifting effect (controlling for the supply side effect). 39 Of course such a large shifting effect is not surprising in light of Figure 14 which showed a striking drop in taxable closely held wealth compensated by an increase in exempt 38 For example from 1982 to 1993, among the top 1%, the (real) growth of other financial assets was 63% while the growth of closely held stocks was 44%. However from 1987 to 1993, closely held stock (in the top 1%) grew faster (37%) than other financial assets (17%). 39 Such shifting effects are quite robust to assuming a rate of growth of closely held stock that is slower (absent any tax change) than other financial assets. For example, one would have to assume that closely held assets would have declined by 15% in real terms from 1993 to 2002 to make the shifting effects disappear for the top 1% group, which seems very closely held wealth. Second, the estimates for the supply side elasticity are sensitive to the choice of the comparison years and hence cannot be estimated precisely with our series. 40 However, the elasticity estimates are never extremely large and are often around zero (or even negative). This

shows that the data series do not display consistent evidence of a very large supply side effect. Third and finally, Panel C shows that the combination of large shifting effects with moderate supply side elasticity implies that the actual tax loss due to the reform is much larger than the predicted tax loss of the reform absent any behavioral response. Even in the case of column (1)

where the supply side elasticity ! e is largest and equal to 0.83, the actual loss in tax revenue from the top 1% wealth holders is larger than the loss in tax revenue assuming no behavioral response. When the supply side elasticity estimate is smaller, the loss in tax revenue with behavioral responses can be three to four times larger than with no behavioral responses. As our theoretical model showed, the difference between actual changes in tax revenue and predicted changes in tax revenue (absent the behavioral response) are a measure of the efficiency costs of the tax change. 41 The last row in Table 2 displays such an estimated change in total surplus due to the tax change.

Therefore, our estimates suggest that the wealth tax exemption was a very inefficient way to provide tax relief: the welfare gain to taxpayers was substantially smaller than the loss in tax revenue because resources were dissipated by taxpayers in meeting the tax exemption criteria. This ends up increasing the deadweight burden of taxation as individuals change their behavior in order to benefit from the tax reductions [START_REF] Feldstein | Tax Avoidance and the Deadweight Loss of the Income Tax[END_REF]. Our empirical analysis could be made more precise using directly longitudinal micro-data on wealth taxpayers. Such data could provide direct evidence of shifting and of shifting costs. 42unrealistic given the growth that closely held stock experienced in the pre-tax reform period from 1982 to 1993. 40 In contrast to shifting parameters, ! e is also sensitive to the assumption about the growth rate ! g of closely held assets absent the tax change.

Conclusion

This paper has attempted to analyze income and wealth concentration in Spain from a long-run perspective using the income tax statistics evidence.

We recognize that our data sources, especially before the return to democracy, cover only the very top of the income distribution so that we cannot speak to overall income inequality patterns. We have argued, however, that the extent of tax evasion at the top of the distribution, was likely much lower than commonly thought and that, as a result, those tax statistics can cast new useful light on the patterns of income concentration in Spain before the return to democracy.

Our results show that income concentration was much higher during the 1930s than it is today: the top 0.01% income share was about twice as The exemption of stocks from the wealth tax base for business owners actively involved in managing their business introduced in 1994 constitutes a striking example of the perverse effects of eroding the tax base, both on efficiency and redistributive grounds. This exemption had a minor effect on the tax base initially but now reduces the tax base of the wealthiest taxpayers by about 40%, weakening substantially the redistributive effects of the progressive wealth tax. Furthermore, the erosion of the tax base has been due primarily to wealthy business owners shifting from the taxable status to the non-taxable status. This suggests that, not only the costs of the tax cut are much higher than predicted based on a scenario with no behavioral response, but also that those tax losses create substantial additional deadweight burden as business owners expend significant resources to qualify for the nontaxable status. Taxable income included income from real estate, capital, rural and mining activities, commercial and industrial business, labor and pensions. Mainly due to the narrow managerial capabilities of the government, this first law determined a high taxable income threshold (100,000 pesetas lowered to 80,000 pesetas in 1936) together with low progressive rates, ranging from 1% to 11% (Table F1). In 1933 there were only 1,446 tax returns and income tax collection represented 0.03% of GDP and 0.35% of total tax collection (Table B3 andTable G). The income tax was based on individual income (as opposed to family income) from 1933 to 1939.

The fiscal reform of 1940 (Law 16/12/1940), which made changes in the whole tax system, was mainly motivated by the need to increase fiscal revenues to solve the post civil war problems and to cancel war debts. Consequently, the reform relied on the traditional schedule income and consumption taxes, which were much easier to collect. Concerning the Contribución sobre la Renta, it reduced the minimum taxable income to 70,000 pesetas and substantially increased the progressivity of the rates, with a top marginal tax rate of 40% for incomes above 1,000,000 pesetas. It also raised the taxes on lower incomes, with the minimum tax rate jumping from 1% to 7.5%. It introduced family deductions and a supplementary 30% rate for single individuals. The new law applied to 1941 incomes. From 1940 on, the income tax was based on family income (instead of individual income from 1933 to 1939).

Tax rates were further increased in 1942 (Law 6/2/1943), when the minimum threshold was set to 60,000 pesetas. Two new reforms (Law 16/12/1953 and Law 26/12/1957) failed to generalize the coverage of the tax. The definition of "unjustified wealth gains" (defined as those which could not 43 The autarky regimes governing the territories of Navarra and País Vasco and their relationship with the central administration is not a new issue in the history of Spain. Those regimes date back to the XV century. More recently, Navarra's privilegies were regulated by the Ley Paccionada (1841). The Régimen de Concierto was negotiated with Alava, Guipúzcoa and Vizcaya in 1877, for which the provinces were responsible for the collection of national administration taxes while making lump sum transfers to Madrid. The 1936-1939 civil war and Franco's policy towards 'traitor' local nationalisms changed the scenario. On the one hand, Alava and Navarra received a preferential treatment and kept their prerogatives after their contribution to the war on Franco's side. On the other, the autarky of Vizcaya and Guipúzcoa was abolished in 1937 (Decree Law 23/6/1937), even before the conflict had ended. Financial autonomy was recognized again during transition to democracy (Real Decreto-Ley 30/10/1976). be explained by declared income flows) for audit purposes helped improve the inspection results, and had a positive impact on the tax collection.

By the mid-1960s the Contribución had been pushed down in the fiscal agenda. 44 The stabilization plan of 1959 had been extremely successful in terms of government revenues so the tax reform of 1964 was not motivated by fiscal deficits but to promote growth and development. The Law 11/6/1964 and the Decree 27/11/1967 made the valuation of taxable income dependent on the system of schedule taxes. 45 Consequently the personal income tax completely lost its autonomy. Theoretically there were no minimum threshold to file; however, the usual obligation began at 200,000-300,000 pesetas. Tax rates ranged from 15% to 61.4%, with an average maximum rate of 50%.

The collection results were well below expectations again and the situation remained unchanged after the reforms of 1973[START_REF] Albi Ibáñez | La Distribución de la Renta Personal en España (1964-1967-1970)[END_REF](Decree Laws 12/1973and 13/1975). The top marginal rate was reduced to 56.12% with an average maximum rate of 40%. Finally, and just before the introduction of the modern income tax in 1979, the law 50/1977 offered a tax amnesty 1976; this was a success as 213,000 tax filers responded positively.

A.2. The modern income tax

The modern income tax was established in 1979 (Law 44/1978), with two major reforms in [START_REF] Castañer | El Efecto Redistributivo del IRPF 1982-1988[END_REF]and 1998[START_REF] Albi Ibáñez | Sistema Fiscal Español[END_REF] provides a detailed description of the current system along with all the reforms from 1979 to date.

From 1984 to 1987 the top marginal rate was 66%; however the average tax rate could not exceed 46%. In 1988 the tax scale was completely restructured downwards; the top marginal rate decreased from 66% to 56%, but the 46% limit was eliminated (Table A1,column 9).

The reform of 1991 did not modify either the tax rates or the main deductions. It updated the legislation in terms of individual and joint filing after the Constitutional Court decided in 1989 that the obligation to file jointly for married couples was thereafter unconstitutional. It also introduced changes in the taxation of capital gains, which we briefly describe below.

Since the reform of 1998 (Law 40/1998), the system was not supposed to tax overall but disposable income, after the deduction of a personal and family minimum income threshold (family-related reductions existed before, but they were applied to the amount of the tax and not to the income). For this reason, the joint-filer tax scale disappeared, so that the same scale applies to everybody since that year. The reform also meant a general rate reduction in the marginal rates. The drops ranged from 2% (from 20% to 18% for the bottom bracket) to 8% (from 56% to 48% for the top bracket). It also reduced the number of brackets from eight to six and eliminated the 0% rate for the lowest income.

Concerning capital gains, the following facts are worth mentioning. Between 1978 and 1991, capital gains (excluding gratuitous inter-vivos and mortis causa transfers) were taxed as regular income, according to the tax rate scale. From 1992 to 2004, a distinction was made between short run (or 'regular', meaning below one year) capital gains and long run (or 'irregular') capital gains. Short run capital gains are added to the main income and taxed according to the tax scale.

Until 1998 long run capital gains were first corrected downwards by a coefficient depending both on the nature of the asset and the number of years the asset had been held (real estate, -5.26% per year; stock: -11.11% per year; -7.14% per year for other assets). Finally, the tax was computed as the maximum of (a) adding 50% of irregular capital gains to the regular income and applying the tax scale to the result; and (b) applying the individual average tax rate to 100% of the irregular gains. Since 1996 the average tax rate affecting irregular capital gains could not exceed 20%.

From 1997 to 1998, long run capital gains generated in one to two years continued to follow the rules described above. For those produced in more than two years, a 20% rate was applied only to any amount beyond 200,000 pesetas.

Since 1999 only gains generated in more than two years are considered "irregular" and consequently taxed in a different way from the rest of income, at a 20% rate (18% since 2002).

A.3. The Wealth Tax

The Law 50/1977 established a "transitory" and "exceptional" tax on net wealth, declared and paid annually at the same time as the income tax but on a separate form. Originally it was meant to serve as a control over the income tax, with limited redistributive goals. Tax filing was done on an individual basis, with the exception of married couples under joint tenancy; joint filing was optional between 1988 and 1990.

Concerning taxable wealth and valuation rules: (a) urban real estate was valued at property registry values (catastro), corrected by coefficients which depended upon the year of construction; (b) rural real estate value was the result of capitalizing at 4% the amount fixed by the local estate tax; (c) checking, savings accounts and time deposits corresponded to the annual average balance, net of any amount used to purchase other components of wealth or to cancel debts; (d) life insurance corresponded to recovery value; (e) bonds and traded stock, at the monthly average price during the last quarter; (f) closely held stock, at liquidating value; (g) small personal goods, 3% of wealth below 20 million pesetas and 5% beyond; (h) other items, at market prices and (i) debts at nominal value. Urban real estate declared historical monuments and art works involved in cultural activities were exempted.

Since 1992, a major reform by the Law 19/1991 put an end to the transitory an exceptional character of the tax. It established a strictly individual filing and introduced changes in some of the included components as well as in their valuation rules. In particular, (a) real estate is valued at the highest of (i) the property registry value, (ii) the purchasing price, (iii) the value determined for other taxes; (b) checking, savings accounts and time deposits, valued at the highest of the final balance or the 4th quarter average balance; (c) bonds and traded stock, at the average of market price during the 4th quarter; (d) closely held stock, at the theoretical value according to the last audited balance; if the audit is still pending the value is obtained from the highest of the last audited balance or the average of the last three annual profits capitalized at 12.5%;46 (e) life insurance at recovery value; (f) annuities at capitalization value; (g) art works and antiques, at market value; (h) intellectual and industrial property rights, exempted if belonging to the original author and valued at purchasing prices otherwise; (i) other items, at market prices and (i) debts, at nominal value. Small personal items and pension funds are not taxed. The main residence was exempted up to 25 million pesetas (150,253.03 euros) since 2000 (Law 6/2000).

Of particular importance for Section 5 in the main text, the Law 22/1993 introduced the following new exemptions, starting in 1994:

(a) Goods necessary for business activities constituting the main income source, performed in a direct and personal way by the individual.

(b) Closely held stocks of business corporations whenever all three of the following conditions were met:

(i) the individual is substantially engaged in the business activity (he is the manager), getting over 50% of his total labor, business and professional income from it;

(ii) the individual owns at least 20% of the capital;

(iii) the corporation is not involved in wealth management as main activity.

Since 1995 the minimum share requirement was reduced to 15% (Law 42/1994) for the individual, and set to 20% for the family in 1997 (Law 13/1996). In 1998, professional activities were also included in the exemption mentioned in (a) (Law 66/1997). In 2003, the individual ownership threshold was lowered to 5% (Law 51/2002). 47As of 1/1/1997 the wealth tax revenues were transferred to the local governments (Law 46/1996).

B. References on data sources for Spain

Table I summarizes the references on data sources for Spain.

B.1 Tax Statistics

Income tax statistical information covering the "old" income tax was published regularly between 1933 and 1961: Dirección General de Rentas Públicas, Estadística de la Contribución General sobre la Renta 1933-1934; Dirección General de Contribución sobre la Renta, Estadística de la Contribución sobre la Renta, 1935Renta, -1940Renta, , 1941Renta, ,1942; Dirección General de Contribución sobre la Renta, Estadística de Servicios 1943Servicios , 1944Servicios , 1945Servicios , 1946Servicios , 1947Servicios , 1948Servicios , 1949Servicios , 1950; Ministerio de Hacienda, Dirección General de la Contribución sobre la Renta, Estadística de Servicios 1951Servicios , 1952Servicios , 1953Servicios , 1954Servicios , 1955; Ministerio de Hacienda, Dirección General de Impuestos sobre la Renta, Estadística de Servicios de la Contribución sobre la Renta 1956Renta , 1958Renta , 1959Renta , 1960Renta , 1962. . Tables display the distribution of taxpayers by level of income together with taxable income and tax paid.

There are no official income tax statistics publications from 1962 to 1979. The Instituto de Estudios Fiscales (1973,1974) has published a set of statistics from unofficial sources covering total tax files between 1963 and 1974 together with the distribution of files by income brackets for 1971.

Much more detailed data describe the evolution of the income and wealth taxes between 1981 and 2003: Agencia Estatal de la Administración Tributaria, Departamento de Informática Tributaria, Madrid, Estadísticas IRPF y Patrimonio 1990Patrimonio , 1991Patrimonio , 1992Patrimonio , 1993Patrimonio , 1994Patrimonio , 1995Patrimonio , 1996Patrimonio , 1997Patrimonio , 1998Patrimonio , 1999Patrimonio , 2000;;Dirección General de Tributos, Subdirección General de Política Tributaria (2002), El Impuesto sobre la Renta de las Personas Físicas y el Impuesto sobre el Patrimonio en 1999; Ministerio de Economía y Hacienda, Memoria de la Administración Tributaria, 1982[START_REF] Alcaide | Distribución Personal de la Renta Española en 1980[END_REF][START_REF]Ministerio de Economía y Hacienda, Memoria de la Administración Tributaria[END_REF], 1985, 1986, 1987, 1988, 1989[START_REF] Escribano | Evolución de la Pobreza y la desigualdad en España 1973-1987[END_REF][START_REF] Castañer | El Efecto Redistributivo del IRPF 1982-1988[END_REF][START_REF] Castillo López | El Fraude Fiscal en España[END_REF], 1993[START_REF] Comín | El Fraude Fiscal en la Historia: Un Planteamiento de sus Fases[END_REF], 1995[START_REF] Slemrod | High Income Families and the Tax Changes of the 1980s: the Anatomy of Behavioral Response[END_REF][START_REF]Ministerio de Economía y Hacienda, Memoria de la Administración Tributaria[END_REF][START_REF] Ruiz-Castillo | A Simplified Model for Social Welfare Analysis. An Application to Spain, 1973-74 to 1980-81[END_REF][START_REF] Feldstein | Tax Avoidance and the Deadweight Loss of the Income Tax[END_REF], 2000, 2001[START_REF] Gradín | Polarization and Inequality in Spain: 1973-91[END_REF], 2003, 2004[START_REF] Deaton | Measuring Poverty in a Growing World (or Measuring Growth in a Poor World)[END_REF]. As for the denominator, total wages and salaries are defined as total employment income from National Accounts, net of social security, and excluding País Vasco and Navarra. Total number of employees is total salaried employment from National Accounts. As the wages of spouses are aggregated for income tax purposes until 1987, we corrected estimates for 1982-1987 along the same lines as explained in Appendix D.2.

B.2 Wages and Salaries

Results displayed in

C. Wealth and Income Denominators

C.1 Wealth Denominator

In order to compute wealth shares we need to estimate the total personal wealth. We have used two definitions of personal wealth: financial wealth (wealth excluding pension funds -which are not taxed-, real estate and mortgage debt) and total wealth (including real estate and mortgage debt but still excluding pension funds).

The wealth denominator relies on five statistical sources: (a) Banco de España (2005), Cuentas Financieras de la Economía Española 1990-2005. Financial Wealth: Financial wealth is defined as the sum of bank deposits, currency holdings, stocks and investment funds, other fixed claim assets and insurance contracts on the asset side, minus commercial and other credit on the liability side. To match the definition of taxable wealth, we do not include pension funds. Also long run loans are excluded as a proxy for mortgage debt. The data were selected from (a) and correspond to the 4th quarter, covering the period 1989-2002.

In order to estimate the financial wealth for the period 1982-1988, we proceeded in the following way. The GDP shares of deposits and currency holdings, insurance contract net of pensions, other fixed claim assets and debts were rather stable for the first years for which data exist (1989)(1990)(1991)(1992); consequently we fixed the ratios for 1982-1988 at the 1989 level. On the other hand, the stock and investment funds GDP share has displayed an increasing tendency during the decade of 1990, in parallel with the Madrid stock market index. Therefore, for 1986-1988, we applied the 1989 stock and investment funds/GDP ratio corrected by the evolution of the stock market index during the 4th quarter (highest minus lowest values). [START_REF][END_REF]For -1985 the share was set at the same level of 1986.

Real Estate Wealth: The consistency between valuation rules in the tax code and the data available posed several methodological problems to estimate this fraction of wealth. Between 1978 and 1992, urban real estate was mainly priced at cadastral values. Rural estate valuation formula required capitalizing at 4% the amount fixed in the local estate tax. Since 1992, real estate, both urban and rural, must be valued at the highest of (a) the property registry value, (b) the purchasing price, (c) the value determined for other local taxes. Local real estate taxes are based on cadastral values, computed following an established formula with price-coefficients defined for land surface, construction type, urban zone, etc, and which can be updated periodically by local authorities. Nevertheless, cadastral values are generally less than 50% of market prices. This can be easily verified comparing the Bank of Spain statistics (based on market prices, source (c)) with the property registry statistics (source (d)). For instance, between 1990 and[START_REF] Gradín | Polarization and Inequality in Spain: 1973-91[END_REF] the ratio between both series ranged from 30% to 45%. This implies a gap difficult to correct between the numerator and the denominator. For this reason, we also studied separately the distribution of financial wealth (net of real estate) in the main text.

Real estate net wealth is the result of deducting mortgage loans from household real estate wealth. The former is taken from Banco de España, Indicadores del Mercado de la Vivienda (source (c)). Data correspond to the 4th quarter and cover years 1987 to 2004. These estimates are constructed upon the series of residential units, average surface and average market prices. On the liability side, mortgage debts are approximated by long run debts from Cuentas Financieras de la Economía Española (source (a)). For the years 1982-1986 we fixed the real estate wealth/GDP ratio at the 1987 level.

Wealth tax information excludes Navarra and Pais Vasco. To take this fact into account, we corrected total wealth as follows. We assumed that total wealth in those regions was roughly proportional to real estate wealth. The share of Navarra and Pais Vasco real estate wealth in Spain is taken from Caixa de Catalunya (2004) (source (e)), based on Ministerio de Fomento.

The numerator, that is, the real estate declared in the wealth tax files, was also adjusted to reflect market prices. The correction factor is the ratio between the market-priced wealth (source (c)) and the GDP from 1987 to 2002. Between 1982 and 1986 the factor was set to the 1987 value. This decision was based on the fact that the ratio [real estate wealth from source (c)/ real estate wealth from property registry statistics source (d)] displays a very similar pattern but is available for a shorter period.

C.2 Total number of individuals

For the period 1933-1971, total number of individuals is computed as the number of individuals in the Spanish population aged 20 and above; this excludes Navarra and Alava since 1937 and 1943 respectively. These series are based on Census interpolations provided by INE and reported in Table B3, column 1. Column 2 also indicates the total number of tax returns (with positive taxable income) actually filed as well as the fraction of adult population filling a tax return (Column 3).

For the period 1982-2002, total individuals correspond to the number of adults aged 20 and over excluding País Vasco and Navarra. Again this series come from Census interpolations and are reported in Table A1 1980,1991,2001.

C.3 Total Income Denominator

For the period 1981-2002 total income is defined as wages and salaries from National Accounts net of social contributions plus 50% of social transfers, plus 66.6% of unincorporated business income (excluding Navarra and Pais Vasco), plus all non-business, non labor income reported on tax returns. The total denominator series expressed in 2000 Euros is reported in Column 4 of Table A1. The average income per adult is reported in Column 7 while the CPI index (base 100 in year 2000) is reported in Column 6.

For the period 1933-1971, we use as denominator 66% of the Spanish GDP from Prados de la Escosura (2003). The number 66% is chosen to be consistent with our denominator for the recent period, which fluctuates between 63% and 69% of Spanish GDP (excluding Pais Vasco and Navarra). Our denominator for the 1933-1971 period is reported in Table B3. The first official consumer price index dates back to 1940. Table B3, Column 4 displays the income series converted in 2000 Euros.

D. Estimating Top Shares

D.1. Basic Pareto Interpolation

The general interpolation technique is based on the well known empirical regularity that the top tail of the income distribution is very closely approximated by a Pareto distribution. A Pareto distribution has a cumulative distribution function of the form F(y)=1-(k/y) a where k and a are constants, and a is the Pareto parameter of the distribution. Such a distribution has the key property that the average income above a given threshold y is always exactly proportional to y. The coefficient of proportionality is equal to b=a/(a-1).

The first step consists then in estimating the income thresholds corresponding to each of the percentiles P90, P95, P99, …, P99.99, that define our top income groups. For each percentile p, we look first for the published income bracket [s,t] containing the percentile p. We estimate then the parameters a and k of the Pareto distribution by solving the two equations: k=s p (1/a) and k=t q (1/a) where p is the fraction of tax returns above s and q the fraction of tax returns above t. 48 Note that the Pareto parameters k and a may vary from bracket to bracket. Once the density distribution on [s,t] is estimated, it is straightforward to estimate the income threshold, say y p , corresponding to percentile p.

The second step consists of estimating the amounts of income reported above income threshold y p . We estimate the amount reported between income y p and t (the upper bound of the published bracket [s,t] containing y p ) using the estimated Pareto density with parameters a and k. We then add to that amount the amounts in all the published brackets above t.

Once the total amount above y p is obtained, we obtain directly the mean income above percentile p by dividing the amount by the number of individuals above percentile p. Finally, the share of income accruing to individuals above percentile p is obtained by dividing the total amount above y p by our income denominator series (Table A1, col. ( 4)). Average incomes and income shares for intermediate fractiles (P90-95, P95-99, etc.) are obtained by subtraction.

D.2. Adjustments to raw Pareto Interpolations

Period 1933-1971

For the period 1933-1971 we adopt the following adjustments to the statistics.

In 1935 and 1940, the statistics also report tax filers from previous years, who have been subject to an audit and a subsequent increase in reported income. Those audited tax filers are placed in the bracket where they belonged in the previous year but only the additional income uncovered by the audit is reported. As a result of those audited tax filers, the number of filers in each bracket is too high relative to income reported. In order to remove those audit taxpayers, we discard the information on the number of tax filers per bracket and we use only the total income per bracket. We recover the number of tax filers by assuming that average income per current year taxpayer in 1935 and 1940 is the same as in 1934. Our estimates are slightly over-estimated due to the additional income due to audits. However, additional income due to audits is probably small relative to regular reported income. Furthermore, income including audits is a closer approximation to real incomes than income before audits (although for 1935 and 1940, the additional income from audits corresponds to an earlier year).

For 1941, about 14% of tax returns were reported separately and only in the aggregate. As the average income for those 14% returns is extremely close to the average for remaining returns, we assume that those 14% returns are distributed by brackets in the same way as the rest of returns. The same issue arises for 1957, 1958, 1961 where a significant fraction of returns were not processed in time for the regular publication and are only reported in aggregate in the subsequent publication year. In each case, we assume that those late returns are distributed as the regular returns. Because the average income of late returns is close to the average for regular returns, this seems an acceptable assumption.

From 1942, a deduction for dependent children was introduced and the tax returns are presented by size of income net of this dependent children exemption. The deduction is 3,000 Pesetas for each child from 1942 to 1953, 10,000 Pesetas from 1954 to 1960, and 25,000 Pesetas in 1961. We add back those deductions to our income estimates in order to estimates shares based on income before those deductions. In most years, those deductions are reported by brackets. When they are only reported in aggregate, we impute the deductions in each bracket using years when this information is provided. The average number of children is fairly stable overtime and across brackets so this approximation is acceptable.

Two important additional deductions are introduced in 1954. The first deduction is deductions for extraordinary expenses and charitable contributions. The law allowed for deductible expenses without bounds, which were declared at the discretion of the taxpayers: wedding expenses, pharmacy purchases, transfers to family members in state of necessity (where the term necessity was fuzzily defined). Individuals could also make donations without limits (many of which were suspected of being de facto self-donations for high income earners, when the individual himself managed the foundation, created with the sole purpose of attracting donations). The second deduction is a deduction for employment income equal to 33% of labor income up to a maximum deduction of 100,000 Pesetas. Those two deductions are reported by brackets for years 1958, 1959, and 1961, and are about 5% of reported incomes each within the top 0.1%. We assume that the level of deductions is the same as in 1958 in years 1954-1957 when the information on deductions is not reported separately.

The 1971 tax statistics are reported by size of gross income equal to the sum of each component (capital income, business income, labor income, etc.) before the extraordinary deductions and the deductions for dependent children. However, the deduction for labor income has been netted out of the labor income component. Because there is no information of labor income by brackets, we assume that the fraction of labor income within the top 0.1% is 20% (which was the corresponding number in 1961, the closest year where this information is available). The labor income deduction is also about 5% of total income in the top 0.1% in 1971. Period 1981Period -2004 1. Exclusions from the income tax Statistics are presented by brackets of income net of the labor income deduction and the pension deduction. The amount of those deductions is reported for each bracket in the tax statistics. Therefore, for each fractile, we compute the average amount of deductions and add those amounts to the raw estimates.

Series excluding capital gains

Second, since 1981, capital gains are included in taxable income (see appendix section B above). For series excluding capital gains, we need to subtract the capital gains component from the raw series. The amount of capital gains is also reported by brackets in the tax statistics. In order to compute our series from the raw series, one could simply deduct for each group the share of capital gains estimated from composition tables. The problem is that ranking according to the income including capital gains and ranking according to income excluding capital gains might be different, especially at the very top. For example, in the extreme case where very top incomes of the income tax statistics distributions consist only of capital gains, then the deduction of capital gains would lead to the conclusion that the very top incomes of the income (excluding capital gains) distribution are equal to zero. Therefore, deducting the full amount of capital gains would provide an underestimate of the income shares we would like to estimate. In order to correct for this re-ranking bias, we therefore need to subtract less than 100% of capital gains.

Based on other studies such as [START_REF] Piketty | Income Inequality in the United States, 1913-1998[END_REF] for the United States and [START_REF] Saez | The Evolution of Top Incomes in Northern America: Lessons from Canadian Evidence[END_REF] for Canada, where not only similar tabulated tax statistics but also micro data are available, a good approximation is to subtract 80% of capital gains amounts instead of 100% to obtain shares of income excluding capital gains. This is therefore the rule we follow in the case of Spain. Using the 2002 large sample of micro-tax returns, we have verified that this rule gives very accurate results: the estimates based on micro-data excluding capital gains for 2002 are extremely close to the results we obtain from the tabulated statistics published by the tax administration.

Shift from family to individual taxation in 1988

Before 1988, taxation was based on the family unit (as in the United States today). Starting in 1989, individual taxation became possible and is actually an advantageous option when the secondary earner has positive income. As we have discussed above, our top groups are defined relative to the total adult population and our series measure individual income concentration. For the period 1988 to 2002, income tax statistics measure individual incomes as married couples where both spouses have positive incomes have an incentive to file separately in order to reduce their tax burden.

Before 1988, however, income tax statistics measure family income as the income of spouses are aggregated for income tax purposes. Therefore, our basic methodology overstates income concentration (as spousal income is added to the income of top earners). Indeed, uncorrected series display a clearly visible discontinuity from 1987 to 1988. We use the micro tax panel data to make the correction for the 1981-1987 period. Using the micro data for 1988, we can compute top income shares at the household level and at the individual level (as the micro data allows to reconstitute families). We can then compute adjustment factors as the ratio of the individual shares to the household shares. We then apply those factors to all years from 1981 to 1987 to obtain corrected estimates. This correction reduces raw income shares by about 10%.

Top Wealth Shares Estimation

Top wealth shares for the period 1982-2002 are also estimated using the same Pareto interpolation technique. We do not make a correction for individual versus family filing because the wealth tax has always been assessed at the individual level (except for married couples with joint tenancy) and, in contrast to income share series, there are no discontinuity in the series from 1987 to 1988.

As in the case of the income tax, we add back exempted items such as exempted businesses (after the 1994 reform) or the standard exemption for the main residence (after 2000), which are fortunately reported by wealth brackets in the published statistics.

We estimate two top wealth shares series : series excluding real estate and series included market priced real estate. For series excluding real estates, we subtract the real estate (including the real estate exemption after 2000) from our raw estimates. For series including real estates, we inflate the value of real estate by a uniform multiplicative factor equal to total real estate from the Flow of Funds accounts divided by total cadastral value reported in aggregate real estate statistics, and we add back to our raw series the difference between the market price series and the cadastral value.

Estimation of wealth and income composition series

We have constructed income and wealth composition series for each of our top groups for the period 1981-2002 using tax statistics showing the breakdown of income and wealth into various components by income and wealth brackets.

The income composition series reported in Table C indicate for each upper income group the fraction of total income (including capital gains) that comes from the various types of income. We consider 4 types of income: wage income; entrepreneurial income; capital income (excluding capital gains); and realized capital gains. Wage income includes wages and salaries (including the wage income deduction), as well as pensions. Entrepreneurial income includes self-employment income from professions such as doctors, lawyers, etc. Business income also includes income from sole proprietorships, partnership income, and farm income. Capital income includes dividends, interest income, rents, and other investment income. Capital gains include both long-term and short-term capital gains reported on tax returns. We have excluded from these composition series the other income category which never make more than 5% of the total income as this simplifies the reading of our composition series (the other income category was taken into account when computing top income levels and top income shares in total income).

The wealth composition series reported in Table E2 indicate for each upper wealth group the fraction of total wealth (including the market value of real estate) that comes from the various types of assets. We consider six types of assets: real estate, business assets, fixed claim assets, stocks, other assets, and debts. Real estate includes the market value of real estate. It is estimated as reported real estate amount (including the deduction for primary residence since 2000) times the ratio of total market value of real estate in Spain divided by total cadastral value of real estate in Spain. Business assets include the value of unincorporated business assets. Fixed claim assets include cash, checking and savings accounts, annualized wealth, life insurance, public and corporate bonds. Stocks include publicly traded and closely held corporate stock either directly owned or owned through investment funds. Other includes household goods, jewels, vehicles, intellectual property rights, non-exempted works of arts and other assets. Debts include mortgage debts, consumer debts, and business debts.

The composition series are estimated from the published tables in indicating for each income (or wealth) bracket not only the number of taxpayers and the total amount of their total income (or wealth) but also the separate amounts for each type of income (or wealth), as well as the deductions. The composition of income (or wealth) within each group was estimated from these tables using a simple linear interpolation method. Such a method is less satisfactory than the Pareto interpolation method used to estimate top income levels (no obvious law seems to fit composition patterns in a stable way). See [START_REF] Piketty | Income Inequality in the United States, 1913-2002[END_REF] for a more precise discussion of this method where it is systematically compared with direct estimates using micro data.

D.3. Estimating Top Shares from individual Income Tax Panel

We also computed top shares with and without capital gains (Tables B5 andB6) using the microdata from the panel of income tax returns 1982-1998 (Instituto de Estudios Fiscales, Panel IRPF-AEAT) and the 2002 sample of income tax files (Instituto de Estudios Fiscales, Muestra de Declarantes de IRPF 2002). The panel is composed of approximately 2% of total returns (the number of observations ranges from 123,599 in 1982 to 308,558 in 1998), while the 2002 sample has information for 907,399 out of 15,481,382 files and oversamples high incomes. The definition of individual income follows the same rules as in the tabulated data case. Total reference income and population is also the same.

As it was described above, before 1988 data available only identifies family income as the income of spouses is aggregated in the tax file due to mandatory joint filing. We used the micro tax panel for 1988 to adjust for this.

For 2002, the results from the sample are very close to the results from the tax tabulations. The 2002 sample perfectly matches aggregates. On the other side, the panel shares display an overall similar pattern when compared to shares based on grouped data, but differences are somewhat larger. This is mainly due to sample size issues and sampling strategy problems in the panel.

E. Computing Marginal Tax Rates

Marginal tax rates displayed in Table B4 were computed using the panel of individual income tax returns 1982-1998 and the 2002 sample of income tax files. For each individual we computed the taxable income following the tax code, as the sum of taxable sources excluding elements taxed by average or flat rates and not subject to the progressive tax scale (capital gains, irregular income and income adjustments from previous years). Then we applied the tax scale to identify the marginal rate that affects each individual.

We also computed total gross income as the sum of taxable sources, capital gains and irregular income (but excluding adjustments from previous years) plus labor income deductions. We ranked individuals by gross income (as done for our estimates based on grouped data) and computed the average marginal tax rates for top percentiles weighted by gross income. This procedure explains the fact that in some cases the marginal tax rate is lower for the top 0.01% than for the top 0.1%. The reason is the following: consider two individuals in the top 0.01%; the first one has no capital gains and no irregular income; consequently she is affected by the maximum marginal rate; the second individual only has capital gains; therefore she is affected by a zero marginal rate according to the progressive tax scale, while she still belongs to the top group. As the proportion of capital gains in total income increases with income (see Table C), it is then possible to find more people at the top subject to relatively smaller marginal rates.

F. Estimating Net Worth Shares and Composition from the Wealth Survey

In 2002 the Bank of Spain conducted a household wealth survey whose preliminary results are presented in [START_REF] Bover | Encuesta Financiera de las Familias Españolas (EFF): Descripción y Métodos de la Encuesta de 2002[END_REF]. We compare our results based on the tax statistics with the survey microdata (Table E3).

To be consistent with our tax estimates we defined net financial wealth as the sum of: checking accounts, bank deposits, jewelry, antiques, artworks, life insurance, mutual funds, fixed income securities, business assets, and other household claims net of debts different from mortgage debts. Total net wealth is net financial wealth as described plus the declared price for the main residence plus other real estate minus mortgage debts. We do not consider pension funds, which are not taxed.

As the survey data are based on household information while our results refer to the individual distribution, we compute the top shares under two extreme scenarios. In the first one, we assume that all wealth belongs to the head of the household (panels C and D in Table E3). For the scenario, we assume that every spouse owns 50% of the household wealth (panels E and F in Table E3). The reference total for the population is the number of adults aged 20 and over in all Spain, this time including País Vasco and Navarra.

G. Previous Work on Inequality in Spain

Until the beginning of the decade of 1970 the studies on inequality and income distribution in Spain are very scarce, due mainly to the lack of data. The Instituto de Estudios Agrosociales, 1958 ran a study on the distribution of expenditure in 1956, as an assignment for the FAO, while the Spanish statistics bureau (INE) conducted a households' consumption survey in 1958 (Infomación Comercial Española, 1962).

The first households' budget surveys (Encuesta de Presupuestos Familiares, EPF) were carried out in 1964/1965, 1966/1967, 1969/1970, 1973/1974 and 1980/1981. The results were somewhat deficient, and many ad-hoc assumptions were made for consistency with the national accounts, including corrections for under-reporting by income size and income source, as well as adjustments to a Pareto distribution. In fact, the ability of these surveys to approximate a comparable total personal income from National Accounts was extremely limited. 49 They generated the first distribution series to be comparable in time [START_REF] Inchausti | La Renta Nacional en España y su Distribución[END_REF], 1974;[START_REF] Alcaide | Metodología para la Estimación de la Distribución Personal de la Renta en España en 1970[END_REF][START_REF] Alcaide | Distribución Personal de la Renta en España y otros Países de la OECD[END_REF][START_REF] Alcaide | Distribución Personal de la Renta Española en 1980[END_REF]. According to their estimates, the top 10% received 36.8%, 41.3%, 40.7%, 39.5% and 29.2% of income respectively, stressing a decrease in inequality levels from 1973/1974 to 1980/1981. 50 In 1963 the INE launched the publication Salarios, based on an annual employer survey, referred to workers legally related to any firm employing at least 10 individuals. The survey covered most of the industrial sector, construction and some services, but excluded the agricultural sector, nonroad transportation, leisure and civil service. Respondents were about 2,400 establishments that reported on the number of workers and their average salary by wage intervals. The survey had important methodological revisions in [START_REF]Informe sobre el Consumo Report Monográfico: El Crecimiento del Stock de Riqueza y la Economía Familiar[END_REF]and 1981. Albi, 1975 computed computed Gini coefficients from this wage survey between 1963 and 1972, finding an increasing trend in earnings inequality; [START_REF] Cordero | La Distribución Personal de los Salarios en 1982 y 1986[END_REF]Cordero et al., compared the 1982Cordero et al., and 1986 wage surveys and also found a growing level of wage concentration. 51 Between 1964 and 1980, the INE published an annual report on national income and distribution (Instituto Nacional de Estadística, 1965[START_REF] Gota Losada | La Realidad de la Imposición Personal sobre la Renta[END_REF] and but the information was extremely limited and focused not on the personal but on the functional distribution of aggregate income from National Accounts; it also included a summary of the main results from the wage survey mentioned above.

Based on the 1980/1981 households' budget survey, Ruiz-Castillo (1987) studied inequality using the information about expenditure and not income. [START_REF] Bosch | Evolución de la Desigualdad y la Pobreza en España[END_REF] applied the same methodology to compare the 1973/1974 and 1980/1981 surveys. A new comparison between the 1973/1974 and 1980/1981 surveys pertains to Ruiz-Castillo, 1998. Ruiz-Castillo and Sastre, 1999 added the comparison with the 1990/1991 survey. The authors find a considerable drop in inequality between 1973/1974 and 1980/1981; given the increase of per capita expenditure, they conclude that a rise in welfare took place. For the decade of 1980 they observe an increase in the average expenditure but a stop in the pattern of reduction in inequality which took place during the previous decade. These studies have been extended in Del Rio and Ruiz-Castillo, 2001a,b. Gradín, 2000[START_REF] Gradín | Polarization and Inequality in Spain: 1973-91[END_REF] has used the EPFs to analyze polarization and inequality from 1973 to 1991. 52 Notwithstanding the different levels reported in inequality indexes and the different variable analyzed (income, expenditure), the studies based on households' surveys show a decrease in inequality during the 1970s.

Research has also been done on the basis of the European Community Household Panel (ECHP). See, for example, [START_REF] Pascual | Factores determinantes de la distribución personal de la renta: un estudio empírico a partir del PHOGHE[END_REF] for an analysis of the period 1993-2000 (they find a drop in inequality in 1993-1994, a sustained increase in 1994-1996, and a new decrease in 1997-2000; overall inequality measured by the Gini coefficient seems to display a small overall reduction), and [START_REF] Ayala | La Movilidad de Ingresos en España[END_REF] for mobility issues between 1994 and 1998. Budría and Díaz-Giménez, 2006 analyze in detail the 1998 ECHP wave, as well as income mobility between 1994 and 1998.

Starting in 1985, the INE developed a continuous households' survey. [START_REF] Oliver I Alonso | Anatomía de la Distribución de la Renta en España, 1985-1996: La Continuidad de la Mejora[END_REF]Oliver et al., has used this source between 1985Oliver et al., -1996 and documents an improvement in income distribution for the whole period according to several indicators; nevertheless, the reported Gini coefficient for 1996 is statistically equal to that of 1987.

More recently, researchers have used income tax data to assess inequality, providing a different picture when compared to results from households' surveys. [START_REF] Castañer | El Efecto Redistributivo del IRPF 1982-1988[END_REF][START_REF] Lasheras | Política Redistributiva en el IRPF entre 1982 y 1990[END_REF] analyze the redistributive power of the income tax; the authors show that several inequality indicators grew steadily between 1982 and 1990. [START_REF] Ayala | La Distribución de la Renta en España según Datos Fiscales[END_REF]use the income tax panel between 1982and 1994and income tax tabulations between 1995and 1998 to compute Gini indexes. They do not consider capital gains. They observe an increasing inequality trend between 1982 and 1991, followed by a relative stability until 1994, and a new 51 See [START_REF] Cordero | La Distribución Personal de los Salarios en 1982 y 1986[END_REF] for an account of the limitations of the wage survey since 1981. 52 Other studies include [START_REF] Medel | Los Efectos del Gasto Público en España[END_REF][START_REF] Escribano | Evolución de la Pobreza y la desigualdad en España 1973-1987[END_REF][START_REF] Ayala | La Distribución de la Renta en España en los años ochenta: una Perspectiva Comparada[END_REF][START_REF] Alvarez | La Distribución Funcional y Personal de la Renta en España[END_REF] increasing trend after 1995, which the authors attribute to a growing inequality in the wage distribution. [START_REF] Rodríguez | The Spanish Progressive Income Taxation Evidence[END_REF] use the income tax panel to analyze the redistributive consequences of the income tax reforms between 1982 and 1995.

Finally, both survey and tax sources have been used to study tax reforms, as in Díaz and[START_REF] Díaz | Ideas para una reforma fiscal en España[END_REF][START_REF] González-Torrabadella | Flat Tax Reforms: A General Equilibrium Evaluation for Spain[END_REF]Pijoan-Mas, 2006, among Income defined as annual gross income reported on tax returns including capital gains and before individual income taxes but net of all social contributions (employer and employee) Amounts are expressed in current 2004 Euros.

Column (2) reports the income thresholds corresponding to each of the percentiles in column (1). For example, an annual income of at least 31,599 Euros is required to belong to the top 10% tax units, etc.

Thresholds and Average Incomes in Top Income Groups in 2004 TABLE 1.

( Spain, 1930Spain, -2004 Source: Table A1. Average Real Income CPI-U

FIGURE 2

The Top 0.01% Income Share in Spain, 1933-2004Source: 1933[START_REF] Malefakis | Reforma Agraria y Revolución Campesina en la España del Siglo XX[END_REF] US andFrance, 1933-2004 Sources: US: [START_REF] Piketty | Income Inequality in the United States, 1913-1998[END_REF]; France: [START_REF] Piketty | Les hauts revenus en France au 20 eme siecle -Inegalites et redistributions, 1901-1998[END_REF] and [START_REF] Landais | Les hauts revenus en France (1998-2006): Une explosion des inegalités?[END_REF]Spain: 1933Spain: -1971

FIGURE 4

The Top 10-5%, Top 5-1%, and Top 1% Income Share in Spain, 1981Spain, -2004 Source:

FIGURE 5

The Top 1-0.5%, Top 0.5-0.1%, and Top 0.1% Income Share in Spain, 1981Spain, -2004 Source: Table B1, columns top 1-0.5%, top 0.5-0.1%, and top 0.1%. Income includes realized capital gains 0.0% 0.5% 1.0% 1.5% 2.0% 2.5%

3.0%

FIGURE 6

The Top 0.1% Income Share and Composition in Spain, 1981Spain, -2004 Source: Table B1, top 0.1% income share and Table C, composition columns for top 0.1%. The figure displays the income share of the top 0.1% tax units, and how the top 0.1% incomes are divided into four income components: wages and salaries (including pensions), business and professional income, capital income (interest, dividends, and rents), and realized capital gains. For example, in 1981, the top 0.1% was 1.95% of total income. Of those 1.95%, 0.55% were from wage income, 0.6% from business income, 0.7% from capital income, and 0.1% from capital gains.

FIGURE 13

The Top 0.1% wealth Share and Composition in Spain, 1982Spain, -2004 Source: Table E1 andE2, columns top 0.1%. The figure displays the wealth share of the top 1% tax units, and how the top 1% wealth holdings are divided into 4 components: real estate, business assets, fixed claim assets (cash, deposits, bonds), and stocks (publicly traded or closely held).

FIGURE 14

The Top 0.01% Financial Wealth Share and Composition in Spain, 1982Spain, -2002 Source: Table E1 andE2, and direct computations based on wealth tax statistics. The figure displays the financial wealth share and composition of the top 0.01% tax units. Stocks are broken down into three components: publicly traded stocks, taxable closely held stocks, and exempted closely held stocks.

0%

(3)

(5) (6)

(3)

(5) (6)

(3)

(5) (6)

(3)

(5)

  2004. For 1981 to the present, estimates are based on Spain excluding two autonomous regions: Pais Vasco and Navarra, because they manage the income tax directly and hence are excluded from the statistics. Those two regions represent about 10% of Spain in terms of population and income. From 1933 to 1935, estimates are based on all Spain; Navarra is excluded since 1937 and Alava (one of the three provinces from the Pais Vasco) since 1943.

Figure 1

 1 Figure 1 displays the average personal income per adult estimated from National Accounts that is used as the denominator for our top income shares estimations along with the price index for the period 1932 to 2004. As discussed in the introduction and as shown in Prados de la Escosura, 2003, 2006b, 2007a, real economic growth (per capita) was negative from 1930 to the early 1950s. Rapid economic growth started in the 1950s. Growth was fastest in the 1960s. Economic growth stalled during the transition period to democracy and the first years of the democracy from 1975 to 1985, and then resumed again.

Figure 2

 2 Figure 2 displays the top 0.01% income share from 1933 to 2004. The break from 1971 to 1981 denotes the change from the old income tax to the new income tax. Four important findings emerge from this figure.

  for the period 1981-2002.

Figure 6

 6 Figure 6 displays the share and composition of the top 0.1% income fractile from 1981 to 2004. The figure shows that the increase in the top 0.1%

Figure 8

 8 Figure 8 reports series of wage concentration (based on micro tax statistics) for the period 1982-2002. It is important to keep in mind that those series capture only wage income concentration and hence are silent about changes in business and capital income concentration. The wage series for 1982-2002 based on tax return data show that there has been a steady increase in wage concentration during the last two decades. This increase has taken place primarily within the top 1%, which has increased significantly from 4.3% in 1982 to 6.5% in 2002.

  on assets. We denote by ! l the tax status of the business with ! l = 0 denoting the standard taxable status and ! l = 1 the exempt status.

!

  p * = 0 ( ) , we obtain the standard Harberger formula showing that the marginal loss in tax revenue (per dollar) is proportional to the supply side elasticity ! e and the tax rate ! " .

Figure 14

 14 Figure14displays the composition and share of financial wealth held by the top 0.01% wealth holders. Stocks are now divided into three components: publicly traded stock, taxable closely held stocks, and exempted closely held stock. In 1994, the first year the exemption was introduced, exempted stock represents only about 15% of total closely held stock reported by the top 0.01%. By 2002, the fraction has grown to 77%. Presumably, in 1994, individuals did not have time to reorganize substantially their business activity. Therefore, the 15% fraction of closely held stock benefiting from the exemption in 1994 must be close or just slightly above the fraction of closely held stock which would benefit from the exemption absent any behavioral

b

  to denote before reform variables and subscript ! a to denote after reform variables. Hence ! P b is the fraction of businesses meeting the exemption criteria just before the reform and ! P a is the fraction of businesses meeting the exemption criteria after the reform. Hence ! P b " P a captures the shifting effect (purged from the supply side effect)

  the three observed quantities, we need to make two important additional assumptions. First, we assume that the fraction of closely held stocks meeting the exemption criteria before the reform ! P b is given by the observed fraction of stocks meeting the exemption the first year the reform is implemented. This assumption is reasonable if businesses do not have time to respond to the tax change in the first year after the reform. In any case, if businesses start responding in the first year, then we will over-estimate ! P b , hence under-estimate the shifting effect ! P a " P b and overestimate the supply side elasticity ! e. 37 In the empirical estimation, we

  those key parameters for the top 1% (left panel) and for the top 0.01% (right panel) for various choices for the pre-reform base year and the post-reform year.With those two assumptions, we can estimate the behavioral parameters

  high in the 1930s than over the last two decades. Income concentration dropped during the 1940s and remained fairly stable throughout the Spanish economic miracle from the 1950s to the 1970s. During the last two decades, income concentration has increased significantly and this phenomenon is concentrated in the top 1%, and especially in the top fractiles within the top 1%. A large fraction of the increase is due to a surge in realized capital gains following the stock market boom of the late 1990s and since 2002. The data also show evidence of an increase in top salaries, which has contributed to the increase in top income shares. It should be noted that the increase in income concentration in Spain is much smaller than the increase in concentration that took place in the United States. Wealth concentration in Spain has declined modestly since 1982. The sharp increase in real estate prices, which tend to reduce wealth concentration, have been to a large extent offset by large stock price increases, leaving the overall wealth concentration relatively stable.

  After six unsuccessful attempts since 1910, the first personal income tax (Contribución General sobre la Renta) was established in all the territory of Spain, includingGuipúzcoa and Vizcaya, in 1932 (Law 20/12/1932) during the Second Republic. Based on their historical autarky privileges, Navarra and Alava were excluded since 1937 and 1943 respectively.43

  Figure reports the average real income per adult (aged 20 and above), expressed in real 2004 Euros. CPI index is equal to 100 in 2004.

  Table G the revenue (as a share of GDP) of each tax source in Spain between 1930 and 2005, based on Comín, 1985 and Instituto de Estudios Fiscales-BADESPE.

  Table D are based on the panel of individual income tax returns 1982-1998 (Instituto de Estudios Fiscales, Panel IRPF-AEAT) and the 2002 sample of income tax files (Instituto de Estudios Fiscales, Muestra de Declarantes de IRPF 2002). Individual wage incomes are obtained from the corresponding box in the tax file. Therefore, Table D includes civil servants.

  Table II.21, Hogares e Instituciones sin fines de Lucro al servicio de los Hogares. (b) Banco de España (2004), Encuesta Financiera de las Familias (EEF): Descripción, Métodos y Resultados Preliminares, Boletín Económico 11/2004. (c) Banco de España, Indicadores del Mercado de la Vivienda, www.bde.es/infoest/sindi.htm, Table sindi15. Data refer to averages in the 4th quarter between 1987 and 2004. (d) Ministerio de Economía y Hacienda, Dirección General de Catastro, Estadísticas Catastrales 1990-2004. http://www.catastro.minhac.es/esp/estadisticas1.asp (e) Caixa de Catalunya (2004), Report Monográfico: El Crecimiento del Stock de Riqueza de las Familias Españolas y su Impacto sobre el Consumo en el Período 1995-2003: Una Version Territorial, in Informe sobre el Consumo y la Economía Familiar, June.

  , Column 1. The census data have been taken from Presidencia del Consejo de Ministros, Dirección General del Instituto Geográfico Catastral, Censo de la Población de España 1930; Ministerio de Trabajo, Dirección General de Estadística, Censo de la Población de España 1940; Presidencia del Gobierno, Instituto Nacional de Estadística, Censo de la Población de España 1950; Censo de la Población y las Viviendas de España 1960; Censo de la Población de España 1970; Instituto Nacional de Estadística, Censo de Población y Viviendas

  others.

					Average
	Percentile	Income		Number of adults	income in each
	threshold	threshold	Income Groups	(aged 20+)	group
	(1)	(2)	(3)	(4)	(5)
			Full Adult
			Population	30,718,000	14,653 €
	Top 10%	31,599 €	Top 10-5%	1,535,900	35,993 €
	Top 5%	42,163 €	Top 5-1%	1,228,720	55,411 €
	Top 1%	83,081 €	Top 1-0.5%	153,590	95,132 €
	Top .5%	112,559 €	Top 0.5-0.1%	122,872	154,655 €
	Top .1%	255,964 €	Top 0.1-0.01%	27,646	426,328 €
	Top .01%	989,652 €	Top 0.01%	3,072	2,150,855 €

Notes: Computations based on income tax return statistics and National Accounts.

  All amounts are in millions of 2002 Euros. The tax rates are computed by adding the income tax rate on profits (30% for top 1% and 40% for top 0.01%) and the wealth tax. The wealth tax rate (0.8% for top 1% and 1.3% for top 0.01%) is converted into a profit tax rate assuming a return on assets of 5%.

		1990	4,405	7,412	2002	13,252	4,002	77.1%	66%	40%	37.3%	80.9%	-0.43	-101	-294	-192
	Top 0.01% Wealth Holders	1993 1993	4,301 4,301	7,237 7,237	2002 2001	13,252 12,444	4,002 4,100	80.7% 104.2%	66% 66%	40% 40%	37.3% 37.3%	80.8% 82.6%	-0.42 -0.79	-101 -114	-291 -393	-190 -279
		1990	14,278	28,568	2002	61,308	24,923	87.5%	46%	30%	33.3%	69.0%	0.39	-214	-355	-141
	A. Observed variables and assumptions Notes: Top 1% Wealth Holders Before the Reform (base year) 1993 1993 Imputed exempt closely held stock (E b ) 14,575 14,575 Imputed taxable closely held stock (T b ) 29,161 29,161 After the Reform (post year) 2002 2001 Exempt closely held stock (E a ) 61,308 53,694 Taxable closely held stock (T a ) 24,923 25,269 Growth in other financial wealth from base year to post year (g) 70.1% 82.6% Total tax rate on profits for non-exempt closely-held businesses (τ 0 ) 46% 46% Total tax rate on profits for exempt closely-held businesses (τ 1 ) 30% 30% B. Estimates of key behavioral parameters Fraction of closely held businesses exempt before tax change (P b ) 33.3% 33.3% Fraction of closely held businesses exempt after tax change (P a ) 66.5% 68.4% Supply side elasticity (e) 0.83 -0.06 C. Tax and Welfare Implications of 1994 Wealth Tax Reform Change in tax revenue assuming no behavioral responses -198 -213 Change in tax revenue including behavioral responses -218 -450 Estimated change in total social surplus -20 -237

Table 2 . Estimating Behavioral Responses from the 1994 Wealth Tax Exemption FIGURE 1.

 2 Average Real Income and Consumer Price Index in

  from TableB3(column top 0.01%), 1981-2004 from TableB2(column top 0.01%). For 1933 to 1971, estimations based on the old income tax statistics. For 1981 to 2004, estimations based on income excluding realized capital gains (for homogeneity with older income tax).

		1.6%
		1.4%
												Old income tax
		1.2%
	Income Share	0.6% 0.8% 1.0%										New income tax
		0.4%
		0.2%
		0.0%
		1933	1936	1939	1942	1945	1948	1951	1954	1957	1960	1963	1966	1969	1972	1975	1978	1981	1984	1987	1990	1993	1996	1999	2002
									FIGURE 3
	The Top 0.01% Income Share in Spain,

  from TableB3(column top 0.01%), 1981-2004 from TableB2(column top 0.01%). Top 0.01% income share excludes realized capital gains.

		3.0%
		2.5%				Spain		US		France
	Top 0.01% Income Share	1.0% 1.5% 2.0%
		0.5%
		0.0%
		1933	1936	1939	1942	1945	1948	1951	1954	1957	1960	1963	1966	1969	1972	1975	1978	1981	1984	1987	1990	1993	1996	1999	2002

Table B1

 B1

		16%
		15%
		14%
		13%
	Income Share	10% 11% 12%
		9%
		8%
		7%									Top 10-5%				Top 5-1%			Top 1%
		6%
		1981	1982	1983	1984	1985	1986	1987	1988	1989	1990	1991	1992	1993	1994	1995	1996	1997	1998	1999	2000	2001	2002	2003	2004
		, columns top 10-5%, top 5-1%, and top 1%.
	Income includes realized capital gains

Table A2 .

 A2 Madrid Stock-Market Index and Capital Gains at theTop, 1981Top, -2004 Source: Madrid Stock Market Index from Globalfinance data. For each year, the mean of the low and high is reported. Capital gains at the top 1% is the real amount of capital gains reported by the top 1% income earners The vertical axis measures the logarithm of the Madrid Stock Market Index and the logarithm of the top 1% capital gains. Net real estate is defined as total household real estate wealth net of mortgage debt Fixed claim assets are cash, deposits, and bonds. Stocks include publicly traded and closely held stock, directly or indirectly held.Income Composition of Top Groups within the Top Decile in 1982 and 1999Source: Table E2, rows 1982 and[START_REF] Feldstein | Tax Avoidance and the Deadweight Loss of the Income Tax[END_REF]

	0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 100 1981 10 1000 Log Index Source: Table D, columns Top 10-5%, Top 5-1%, Top 1%. 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 Top 0.1% income share and composition Wages Business Capital Inc. 1993 1994 FIGURE 7 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 FIGURE 8 Top Wage Income Shares in Spain, 1982-2002 1995 1996 1997 1998 1999 K gains 1994 1995 1996 1997 1998 Stock Market Index 2000 2001 2002 1999 2000 2001 K gains in top 1% 0% 2% 4% 6% 8% 10% 12% 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 Income Share Top 10-5% Top 5-1% Top 1% FIGURE 9 Average Net Worth and Composition, 1982-2004 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Average net worth per adult (in 2000 Euros) Other-other debts Stocks Fixed Claim Assets Net Real Estate 0.1-0.01% 0.01% Stocks Business and other assets Panel B: 1999 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0.5-0.1% Real Estate 25% 30% 7% 8% 9% Fixed Claim Assets 1-0.5% 10% 15% 20% Wealth Share 2% 4% 5% 6% Wealth Share 3% FIGURE 10 1-0.5% 0.5-0.1% Real Estate Fixed Claim Assets Source: Table E1, column top 1%. Source: Table E1 Panel A: 1982 0.1-0.01% 0.01% Stocks FIGURE 11 Top 1% Wealth Share in Spain, 1982-2004 0% 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2003 2002 2001 2002 2004 2003 2002 2004 2002 2003 2003 2004 FIGURE 12 Top Wealth Shares (including real estate) in Spain, 1982-2004 0% 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Business and other assets 5% Top 1% Financial only 1% Top 1% including real estate Top 1-0.5% Top 0.5-0.1% Top 0.1%	2004
	100%	90%	80%	70%	60%	50%	40%	30%	20%	10%	0%

Source:

  Population and tax units estimates based on population census. Tax units estimated as number of adults aged 20 and over in Spain (excluding Pais Vasco and Navarra).Total income defined as wages and salaries from National Accounts (net of social contributions) plus 50% of social transfers plus 66.6% of unincorporated business income (excluding Navarra and Pais Vasco), plus all non-business, non labor income reported on tax returns. Consumer Price Index is the official CPI index (see Appendix for details).

	Taxes	(9)	Top Marginal	Tax Rate	(%)	65.09	68.47	65	66	66	66	66	56	56	56	56	56	56	56	56	56	56	56	48	48	48	48	45	45
	Inflation	(8)	CPI	(2000 base)		32.238	36.818	41.560	45.911	49.926	54.289	57.162	60.119	64.116	68.359	72.494	76.647	80.307	84.021	87.682	90.825	92.989	94.485	96.701	100.000	103.196	106.598	109.794	113.299
	6%
	1% 2% 3% 4% 5% (4) (5) (6) (7) Total Income	1982 Total income Fraction income Total income Average income	1983 Closely held stock (non taxable) 1984 1985 1986 1987 1988 1989 Closely held stock (taxable) Publicly Traded Stocks Fixed Claim Assets Business (millions 2000 (2000 Euros) Euros) 198,986 8,706 194,719 8,378 194,859 8,244 194,172 8,078 201,392 8,239 211,410 8,538 224,903 8,967 241,032 9,486 253,218 9,836 274,393 1990 10,518 288,873 10,969 reported by (%) 65.2 65.3 64.5 63.7 63.3 65.0 66.0 66.5 67.2 66.6 68.4 over GDP tax filers (%) 57.8 56.7 57.1 57.6 59.6 63.1 62.9 63.2 66.4 69.1 69.3	1991 291,862 10,942 69.3 71.3	1992 294,440 10,899 286,709 10,479 69.7 69.8 70.8 74.6	1993 293,658 10,598 67.8 74.8	1994 299,045 10,637 305,151 10,698 66.8 65.9 75.2 75.0	1995 320,948 11,091 64.8 75.5	1996 336,126 11,449 349,707 11,741 64.5 64.7 71.5 72.5	1997 359,825 11,988 64.1 73.6	1998 368,802 12,192 383,132 12,569 63.5 63.2 73.9 74.6	1999 397,268 12,933 63.2 74.9	2000	2001	2002
	(1) (2) (3) Notes: Tax Units and Population Adults Number of (2)/(1) tax returns (%) ('000s) ('000s) 1981 22,857 6,296 27.5 1982 23,242 6,262 26.9 1983 23,635 6,397 27.1 1984 24,036 6,544 27.2 1985 24,445 7,081 29.0 1986 24,760 7,896 31.9 1987 25,082 8,028 32.0 1988 25,410 8,954 35.2 1989 25,745 9,845 38.2 1990 26,087 10,965 42.0 1991 26,335 11,584 44.0 1992 26,673 12,341 46.3 1993 27,015 12,794 47.4 1994 27,360 13,578 49.6 1995 27,710 14,119 51.0 1996 28,114 14,620 52.0 1997 28,523 15,000 52.6 1998 28,938 15,424 53.3 1999 29,359 13,797 47.0 2000 29,785 14,123 47.4 2001 30,016 14,734 49.1 2002 30,249 15,410 50.9 2003 30,482 15,978 52.4 2004 30,718 16,465 53.6

TABLE A1 . Reference Totals for Population, Income, and Inflation, 1981-2004

 A1 Notes: Population and tax units estimates based on population censusTax units estimated as number of adults aged 20 and over in Spain (excluding Pais Vasco and Navarra).Total Wealth from Flow of Funds accounts and other sources (see appendix). Consumer Price Index is the official CPI index.

	Wealth Tax	(15)	Top Marginal	Tax Rate		(%)	2.5	2.5	2.5	2.5	2.5	2.5	2.5	2.5	2.5	2.5	2.5	2.5	2.5	2.5	2.5	2.5	2.5	2.5	2.5	2.5	2.5	2.5	2.5	2.5
	Inflation	(14)	CPI		(2000 base)		32.238	36.818	41.560	45.911	49.926	54.289	57.162	60.119	64.116	68.359	72.494	76.647	80.307	84.021	87.682	90.825	92.989	94.485	96.701	100.000	103.196	106.598	109.794	113.299
		(13)	Other	Debts			-4.3	-4.3	-4.3	-4.3	-4.3	-4.3	-4.3	-3.9	-3.6	-3.7	-3.4	-3.9	-3.9	-3.8	-3.6	-3.5	-3.3	-3.1	-3.0	-2.8	-2.5	-2.3	-2.1	-2.0
		(12)	Other				4.3	4.3	4.3	4.3	4.3	4.3	4.2	3.9	3.5	3.5	3.5	4.0	3.9	4.3	4.3	4.3	4.0	4.1	4.4	4.6	4.3	4.2	3.8	3.6
		(8) (9) (10) (11)	Real Estate Mortgage Fixed Claim Stocks	Debt Assets			78.8 -8.8 24.6 5.4	78.8 -8.8 24.6 5.4	78.8 -8.8 24.6 5.4	78.8 -8.8 24.6 5.4	78.8 -8.8 24.6 5.4	78.8 -8.8 24.6 5.4	77.2 -8.6 24.1 7.3	78.7 -7.9 22.0 7.2	79.9 -7.2 20.1 7.2	82.2 -7.1 20.4 4.8	83.0 -6.7 18.0 5.6	80.8 -7.5 20.0 6.6	78.5 -7.4 20.0 9.0	77.2 -7.5 20.2 9.6	75.2 -7.5 20.4 11.1	73.9 -7.8 19.6 13.4	72.0 -8.4 18.2 17.5	70.2 -9.0 16.8 20.9	71.6 -9.6 16.7 19.9	75.7 -10.1 16.6 16.0	78.1 -9.9 15.4 14.6	83.2 -10.0 14.3 10.7	84.1 -10.0 12.8 11.4	85.6 -10.5 12.2 11.0
		(6) (7)	Total Net Average	Wealth	(millions 2000 (2000 Euros)	Euros)	1,011,740 44,264	1,018,749 43,832	1,027,782 43,486	1,049,773 43,675	1,072,658 43,880	1,129,358 45,612	1,224,357 48,814	1,423,393 56,017	1,633,730 63,458	1,711,295 65,600	1,916,839 72,787	1,738,372 65,173	1,754,037 64,928	1,740,097 63,600	1,791,832 64,664	1,814,867 64,554	1,892,367 66,345	2,074,459 71,686	2,284,269 77,805	2,454,847 82,419	2,718,915 90,582	3,022,333 99,915	3,527,016 115,708	3,882,692 126,398
		(4) (5)	Total Net Average	Financial Wealth	(millions 2000 (2000 Euros)	Euros)	303,847 13,293	305,952 13,164	308,664 13,060	315,269 13,117	322,142 13,178	339,170 13,698	385,176 15,357	414,973 16,331	446,285 17,335	427,684 16,395	455,006 17,278	464,271 17,406	507,817 18,798	527,371 19,275	577,725 20,849	614,864 21,870	688,512 24,139	805,178 27,824	867,394 29,544	843,599 28,323	866,099 28,855	811,934 26,842	911,035 29,888	968,109 31,516
		(3)	(2)/(1)		(%)		2.2	2.1	2.3	2.2	2.8	3.2	3.5	3.0	3.3	3.7	3.9	3.2	3.4	3.0	2.8	2.9	3.1	3.3	3.3	2.9	2.9	2.9	2.9	3.0
		(2)	Number of	wealth tax returns		('000s)	509	492	541	535	675	781	887	756	855	974	1,033	863	928	809	783	825	892	946	981	869	874	884	896	920
		(1)	Adults			('000s)	22,857	23,242	23,635	24,036	24,445	24,760	25,082	25,410	25,745	26,087	26,335	26,673	27,015	27,360	27,710	28,114	28,523	28,938	29,359	29,785	30,016	30,249	30,482	30,718
							1981	1982	1983	1984	1985	1986	1987	1988	1989	1990	1991	1992	1993	1994	1995	1996	1997	1998	1999	2000	2001	2002	2003	2004

TABLE A2 . Aggregate Net Worth and Composition, 1981-2004

 A2 Computations by authors on tax return statistics. Taxpayers are ranked by gross income (including capital gains). The Table reports the percentage of total income accruing to each of the top groups. Top 10% denotes top decile, top 10-5% denotes the bottom half of the top decile, etc.

	Wealth Composition	Top 10-5% Top 5-1% Top 1-.5% Top .5-.1% Top .1-.01% Top .01%	(7) (8) (9) (10) (11) (12)	11.46 13.62 2.65 3.04 1.39 0.55	11.41 13.75 2.69 3.11 1.50 0.66	11.59 14.03 2.73 3.09 1.38 0.59	11.72 14.18 2.74 3.08 1.37 0.62	11.63 14.31 2.81 3.21 1.49 0.62	11.70 14.57 2.91 3.38 1.67 0.93	11.64 14.57 2.92 3.40 1.72 1.13	11.77 14.72 2.95 3.43 1.73 1.08	12.08 15.02 2.99 3.49 1.72 0.82	12.10 14.81 2.96 3.43 1.69 0.73	12.00 14.50 2.89 3.32 1.59 0.67	11.65 14.08 2.89 3.34 1.58 0.62	11.53 13.89 2.84 3.28 1.53 0.57	11.70 14.03 2.86 3.30 1.54 0.58	11.61 13.94 2.85 3.30 1.55 0.59	11.60 13.95 2.83 3.32 1.58 0.60	11.45 13.87 2.85 3.36 1.66 0.67	11.37 13.92 2.90 3.48 1.75 0.81	11.39 13.92 2.92 3.57 1.93 1.05	11.35 13.94 2.95 3.68 2.07 1.25	11.29 13.81 2.92 3.64 2.05 1.21	11.15 13.63 2.87 3.58 2.00 1.01	11.02 13.49 2.87 3.67 2.19 1.24	10.84 13.35 2.87 3.73 2.31 1.30
	Total Wealth	Top .1% Top .01%	(5) (6)	1.94 0.55	2.15 0.66	1.98 0.59	1.99 0.62	2.11 0.62	2.59 0.93	2.84 1.13	2.81 1.08	2.53 0.82	2.42 0.73	2.26 0.67	2.20 0.62	2.10 0.57	2.12 0.58	2.14 0.59	2.18 0.60	2.33 0.67	2.56 0.81	2.97 1.05	3.32 1.25	3.26 1.21	3.01 1.01	3.43 1.24	3.61 1.30
	Total Financial Wealth	Top 1% Top .5%	(3) (4)	7.63 4.98	7.95 5.27	7.79 5.07	7.81 5.07	8.12 5.31	8.88 5.97	9.15 6.24	9.19 6.24	9.01 6.02	5.85	8.47 5.58	8.42 5.54	8.22 5.38	8.27 5.41	8.29 5.44	8.32 5.49	8.55 5.70	8.94 6.04	9.47 6.55	9.95 7.00	9.82 6.91	9.46 6.59	9.96 7.09	10.20 7.33
		Top 5%	(2)	21.25	21.70	21.82	21.99	22.43	23.45	23.73	23.91	24.03	23.61	22.97	22.50	22.11	22.30	22.23	22.27	22.42	22.86	23.39	23.90	23.63	23.08	23.45	23.55
	Wealth Tax Units and Population	Top 10%	(1)	32.70 1981	33.11 1982	33.41 1983	33.71 1984	34.06 1985	35.15 1986	35.37 1987	35.68 1988	36.11 1989	35.71 1990	34.97 1991	34.15 1992	33.64 1993	34.00 1994	33.84 1995	33.87 1996	33.86 1997	34.24 1998	34.78 1999	35.25 2000	34.92 2001	34.23 2002	34.47 2003	34.39 2004	Notes:

Table B1 . Top Income Shares in Spain (including Capital Gains), 1981-2004

 B1 Computations by authors on tax return statistics. Taxpayers are ranked by gross income (excluding capital gains). The Table reports the percentage of total income accruing to each of the top groups. Top 10% denotes top decile, top 10-5% denotes the bottom half of the top decile, etc.

	Top 1-.5% Top .5-.1% Top .1-.01% Top .01%	(9) (10) (11) (12)	2.63 3.01 1.35 0.52	2.67 3.07 1.42 0.58	2.71 3.06 1.33 0.55	2.73 3.04 1.31 0.54	2.76 3.09 1.37 0.53	2.85 3.20 1.48 0.68	2.88 3.26 1.48 0.77	2.91 3.28 1.48 0.69	2.95 3.33 1.53 0.65	2.92 3.31 1.53 0.62	2.84 3.20 1.46 0.57	2.86 3.28 1.50 0.56	2.77 3.14 1.41 0.51	2.79 3.15 1.44 0.51	2.77 3.16 1.45 0.51	2.77 3.18 1.47 0.51	2.77 3.19 1.52 0.55	2.78 3.22 1.56 0.61	2.84 3.37 1.68 0.74	2.84 3.43 1.73 0.84	2.84 3.44 1.70 0.81	2.80 3.36 1.70 0.69	2.77 3.37 1.72 0.73	2.75 3.39 1.73 0.75
	Top 10-5% Top 5-1%	(7) (8)	11.48 13.62	11.46 13.75	11.62 14.02	11.76 14.19	11.69 14.28	11.84 14.61	11.80 14.65	11.91 14.78	12.18 15.02	12.19 14.80	12.06 14.45	11.68 14.05	11.58 13.78	11.73 13.92	11.66 13.83	11.66 13.86	11.52 13.75	11.47 13.72	11.50 13.83	11.50 13.85	11.44 13.80	11.28 13.59	11.22 13.48	11.07 13.34
	Top .01%	(6)	0.52	0.58	0.55	0.54	0.53	0.68	0.77	0.69	0.65	0.62	0.57	0.56	0.51	0.51	0.51	0.51	0.55	0.61	0.74	0.84	0.81	0.69	0.73	0.75
	Top .1%	(5)	1.87	2.00	1.88	1.85	1.90	2.16	2.26	2.17	2.19	2.14	2.03	2.06	1.92	1.95	1.96	1.98	2.07	2.17	2.41	2.57	2.51	2.39	2.45	2.49
	Top .5%	(4)	4.87	5.08	4.94	4.89	4.99	5.36	5.52	5.46	5.52	5.45	5.23	5.34	5.06	5.10	5.12	5.16	5.25	5.39	5.78	6.00	5.95	5.75	5.82	5.87
	Top 1%	(3)	7.50	7.75	7.65	7.61	7.75	8.21	8.40	8.36	8.47	8.37	8.08	8.21	7.83	7.89	7.89	7.93	8.03	8.17	8.62	8.84	8.80	8.54	8.59	8.62
	Top 5%	(2)	21.12	21.50	21.67	21.80	22.03	22.82	23.05	23.14	23.49	23.17	22.53	22.25	21.61	21.82	21.71	21.79	21.77	21.90	22.45	22.69	22.60	22.13	22.07	21.97
	Top 10%	(1)	32.61	32.96	33.29	33.56	33.72	34.66	34.85	35.05	35.67	35.35	34.58	33.93	33.19	33.55	33.38	33.45	33.29	33.36	33.95	34.19	34.03	33.41	33.30	33.03
			1981	1982	1983	1984	1985	1986	1987	1988	1989	1990	1991	1992	1993	1994	1995	1996	1997	1998	1999	2000	2001	2002	2003	2004	Notes:

Table B2 . Top Income Shares in Spain (excluding Capital Gains) 1981-2004

 B2 Income tax statistics published by the fiscal administration for years 1933 to 1971. Total number of tax units defined as the number of adults aged 20 and over. CPI index: 100 Euros in 2000 are equivalent to 66.231 Ptas in 1933, …, 1193.1 Ptas in 1971. Total income is defined as 66% of GDP (expressed in millions of 2000 Euros). Navarra is excluded since 1937. Alava is excluded since 1943.

	Top 0.01%			(12)	1.41	1.40	1.53	1.31	1.38	1.21	1.16	1.06	1.12	1.04	0.86	0.82	0.81	0.70	0.62	0.64	0.63	0.73	0.74	0.60	0.56	0.60	0.52	0.51
	Top 0.1-0.05% Top 0.05-0.01%			(10) (11)												1.01	1.01	0.93	0.80	0.81	0.80	0.81 1.09	0.87 1.16	0.73 0.94	0.68 0.89	0.71 0.92	0.59 0.77	0.62 0.73
	Top 0.01%			(9)	1.41	1.40	1.53	1.31	1.38	1.21	1.16	1.06	1.12	1.04	0.86	0.82	0.81	0.70	0.62	0.64	0.63	0.73	0.74	0.60	0.56	0.60	0.52	0.51
	Top 0.05%			(8)												1.83	1.82	1.63	1.42	1.45	1.43	1.82	1.90	1.53	1.45	1.52	1.29	1.24
	Top 0.1%			(7)																		2.63	2.77	2.27	2.13	2.23	1.88	1.86
	Total income Fraction of CPI	(mns of income reported (base 2000)	2000 Euros) on tax returns (%)	(4) (5) (6)	33,232 1.412 66.231	35,624 1.539 68.081	36,674 1.984 68.345	28,532 1.823 118.359	23,580 2.371 158.265	25,878 2.013 169.203	28,019 2.086 168.222	30,984 1.943 175.690	28,742 2.194 187.911	27,708 2.233 246.600	27,359 1.805 290.202	27,668 1.864 309.740	28,138 1.930 326.487	31,320 1.886 361.941	36,433 1.690 396.038	40,870 1.820 388.193	43,475 1.833 394.454	49,673 2.812 399.358	51,583 3.308 415.426	63,511 3.460 487.165	66,635 3.490 551.512	65,012 3.805 592.247	75,007 2.617 613.747	148,219 7.200 1,193.09
	Fraction	filing (%)	(2)/(1)	(3)	0.010	0.012	0.017	0.021	0.033	0.032	0.034	0.035	0.040	0.048	0.046	0.052	0.057	0.069	0.075	0.084	0.090	0.114	0.142	0.217	0.252	0.277	0.193	1.532
	Total number Tax returns	of tax units	('000s)	(1) (2)	14,488 1,446	14,652 1,792	14,818 2,465	15,677 3,222	15,892 5,231	16,110 5,123	16,331 5,538	16,555 5,849	16,782 6,629	17,012 8,223	17,245 7,983	17,481 9,067	17,721 10,111	17,964 12,419	18,134 13,597	18,307 15,427	18,481 16,545	18,657 21,332	18,834 26,716	19,194 41,637	19,377 48,921	19,561 54,143	19,950 38,520	22,129 338,989
					1933	1934	1935	1940	1941	1942	1943	1944	1945	1946	1947	1948	1949	1950	1951	1952	1953	1954	1955	1957	1958	1959	1961	1971	Source:

Table B3 . Top Income Shares in Spain from Older Income Tax Statistics 1933-1971

 B3

	Top 1-.5% Top .5-.1% Top .1-.01% Top .01%
	Top 10-5% Top 5-1%
	Top .01%
	Top .1%
	Top .5%
	Top 1%
	Top 5%
	Top 10%	(1)

Table B4 . Marginal Tax Rates by Income Groups, 1982-2002

 B4

	Top 1-.5% Top .5-.1% Top .1-.01% Top .01%
	Top 10-5% Top 5-1%
	Top .01%
	Top .1%
	Top .5%
	Top 1%
	Top 5%
	Top 10%	(1)

Table B5 . Top Income Shares in Spain (including Capital Gains) from income tax panel 1982-1998 and survey 2002

 B5

	Top 1-.5% Top .5-.1% Top .1-.01% Top .01%
	Top 10-5% Top 5-1%
	Top .01%
	Top .1%
	Top .5%
	Top 1%
	Top 5%
	Top 10%	(1)

Table B6 . Top Income Shares in Spain (excluding Capital Gains) from income tax panel 1982-1998 and survey 2002

 B6

	Wage Entrep. Capital K gains
	Wage Entrep. Capital K gains
	Wage Entrep. Capital K gains
	Wage Entrep. Capital K gains
	Wage Entrep. Capital K gains
	Wage Entrep. Capital K gains

Table C . Income Composition in Top Income Groups, 1981-2004

 C

	Top 0.01%	Wage Entrep. Capital K gains	16.8 32.9 41.9 8.5	15.1 37.1 33.5 14.3	18.2 30.3 41.2 10.3
	Top 0.1%	Wage Entrep. Capital K gains	35.5 29.1 31.8 3.6	31.8 33.5 28.3 6.4	37.6 28.9 28.9 4.5
	Top 0.5%	Wage Entrep. Capital K gains	63.4 17.3 17.6 1.8	62.4 18.5 17.1 2.0	64.4 17.8 16.4 1.4
	Top 1%	Wage Entrep. Capital K gains	76.2 11.0 11.8 1.0	76.2 11.5 11.3 0.9	76.6 11.6 11.1 0.8	75.6 13.2 10.2 1.1
	Top 5%	Wage Entrep. Capital K gains	86.0 6.2 7.5 0.2	85.6 6.9 7.3 0.3	85.3 7.1 7.4 0.2	83.7 8.8 7.1 0.3
	Top 10%	Wage Entrep. Capital K gains	89.3 4.3 6.5 -0.1	89.5 5.2 5.6 -0.3	89.3 5.3 5.7 -0.2	87.1 7.2 5.7 0.0
			1981	1982	1983	1984

Table C (continued). Income Composition in Top Income Groups, 1981-2004

 C

	Top 0.1-0.01% Top 0.01%	Top 10-5% Top 5-1% Top 1-0.5% Top 0.5-0.1%
	Top 0.5-0.1%	Top 0.5% Top 0.1%
		Top 1%
	Top 1-0.5%	Top 5%
		Top 10%
	Top 10-5% Top 5-1%	Total number Total income CPI	of employees (millions of (base 2000)	2000 Euros) ('000s)	(1)

Table D . Top Wage Income Shares in Spain from panel of tax returns 1982-2002 Table E1. Top Wealth Shares in Spain, 1982-2004

 D Notes: Fractiles defined by size of total wealth. For each fractile, the six columns (summing to 100%) give the percentage of real estate, business assets, fixed claim assets (cash, deposits, bonds), stock (publicly traded and closely held), other (insurance, annuities, and other small items) in total wealth. Details on methodology are presented in Appendix. Source: Computations based on wealth tax return statistics

	Fixed	claim Stock Other Debts	6.8 60.6 3.9 -1.0	6.5 64.9 3.5 -2.7	6.9 67.1 3.5 -2.7	7.8 71.4 4.4 -2.6	8.7 69.5 5.0 -2.9	7.5 70.0 4.5 -2.5	6.6 61.8 3.8 -2.1	5.8 63.4 3.8 -1.9	5.9 64.8 3.8 -2.0
	Real Busi-	estate ness	28.5 1.2	26.7 1.0	24.2 1.0	18.3 0.8	18.9 0.8	19.9 0.7	29.3 0.7	28.3 0.7	27.0 0.6
	Fixed	claim Stock Other Debts	9.0 36.1 2.9 -1.8	8.2 41.4 2.7 -2.3	7.9 44.4 2.8 -2.3	8.0 47.5 3.0 -2.3	8.7 45.6 3.3 -2.2	8.7 43.0 3.1 -2.1	7.4 35.5 2.7 -1.7	7.0 35.5 2.6 -1.8	6.9 35.2 2.6 -1.9
	Busi-	ness	1.8	1.7	1.5	1.4	1.3	1.4	1.2	1.3	1.1
	Real	estate	52.0	48.2	45.7	42.4	43.3	45.9	54.9	55.4	56.1
	Fixed	claim Stock Other Debts	10.5 26.2 2.5 -2.1	9.4 29.7 2.4 -2.2	8.9 31.3 2.3 -2.2	8.9 33.9 2.4 -2.1	9.7 32.3 2.5 -2.0	9.7 29.7 2.3 -1.9	8.4 24.5 2.0 -1.7	7.7 24.3 1.9 -1.6	7.4 24.0 1.8 -1.7
	Busi-	ness	2.0	2.1	1.9	1.7	1.6	1.7	1.4	1.3	1.2
	Real	estate	60.8	58.7	57.8	55.2	55.8	58.4	65.3	66.6	67.3
	Fixed	claim Stock Other Debts	12.8 20.6 2.2 -2.3	10.4 26.8 2.2 -2.3	9.2 30.3 2.3 -2.3	10.5 25.0 1.9 -2.3	11.5 24.1 1.9 -1.9	11.4 22.0 1.8 -1.8	10.1 17.8 1.5 -1.7	8.7 16.9 1.3 -1.6	8.2 16.7 1.3 -1.6
	Busi-	ness	2.1	2.1	1.9	1.8	1.7	1.6	1.5	1.3	1.2
	Real	estate	64.7	60.9	58.6	63.1	62.8	65.1	70.8	73.4	74.2
				1997	1998	1999	2000	2001	2002	2003	2004

Table E2 . Composition in Top Wealth Groups, 1982-2002

 E2

		Units
		Adults	Total Net	Average	Total Net	Average	top shares	Real Estate Fixed Claim	Stocks	Business	Other	Debts
	('000s) Top 0.01% Total from tax stats. 30.249	Financial Wealth (millions 2000 (2000 Euros) Euros) 811.933 26.842	Wealth (millions 2000 (2000 Euros) Euros) 3.022.332 99.915	(%)	(%)	Assets (%)	(%)	(%)	(%)	(%)
	Total from survey	32.339	387.417	11.980	1.977.929	61.163		88,07	6,60	5,39	8,52	0,96	-9,55
	A. Including real estate. Individual distribution from tax returns
	top 1%	302			552.180	1.825.449	18,27	61,48	8,52	28,25	1,31	2,17	-1,72
	top 0.5%	151			395.774	2.616.777	13,10	57,79	7,90	32,37	1,26	2,43	-1,74
	top 0.1%	30			169.311	5.597.244	5,60	47,74	7,18	42,87	1,07	2,99	-1,84
	top 1-0.5%				156.406		5,18
	top 0.5-0.1%				226.463		7,49
	top 0.1%				169.311		5,60
	B. Excluding real estate. Individual distribution from tax returns
	top 1%	302	197.592	653.218			24,34
	top 0.5%	151	154.722	1.022.989			19,06
	top 0.1%	30	81.372	2.690.070			10,02
	top 1-0.5%		42.870				5,28
	top 0.5-0.1%		73.350				9,03
	top 0.1% C. Including	Top 0.1-0.01%	81.372				10,02
		Top 0.5-0.1%
		Top 1-0.5%

real estate. Individual distribution from the survey assuming that all wealth belongs to the head of household

	top 10%	3.234	324.673	100.398	1.252.960	387.450	63,35	78,06	6,03	7,67	11,96	1,14	-4,86
	top 5%	1.617	278.134	172.013	902.939	558.428	45,65	72,93	5,65	9,80	14,69	1,42	-4,49
	top 1%	323	176.129	544.639	401.837	1.242.592	20,32	58,55	4,76	16,80	20,62	2,22	-2,94
	top 0.5%	162	144.511	893.734	292.866	1.811.243	14,81	52,70	4,59	20,29	22,33	2,62	-2,53
	top 0.1%	32	90.772	2.806.910	137.602	4.255.030	6,96	35,19	3,40	30,65	31,18	1,02	-1,44
	top 10-5%		46.540		350.020		17,70
	top 5-1%		102.005		501.102		25,33
	top 1-0.5%		31.618		108.971		5,51
	top 0.5-0.1%		53.739		155.264		7,85
	top 0.1%		90.772		137.602		6,96
	D. Excluding

real estate. Individual distribution from the survey assuming that all wealth belongs to the head of household

	top 10%	3.234	369.197	114.166	95,30
	top 5%	1.617	323.762	200.232	83,57
	top 1%	323	208.686	645.316	53,87
	top 0.5%	162	165.658	1.024.520	42,76
	top 0.1%	32	102.122	3.157.898	26,36
	top 10-5%		45.436		11,73
	top 5-1%		115.075		29,70
	top 1-0.5%		43.029		11,11
	top 0.5-0.1%		63.536		16,40
	top 0.1%		102.122		26,36
	E

. Including real estate. Individual distribution based on the survey assuming that wealth is divided equally between spouses

	top 10%	3.234	292.241	90.369	1.006.744	311.313	50,90	74,88	5,96	8,91	13,66	1,39	-4,79
	top 5%	1.617	244.438	151.174	716.443	443.088	36,22	69,26	5,70	11,33	16,19	1,55	-4,03
	top 1%	323	151.786	469.365	328.579	1.016.058	16,61	56,70	4,52	18,15	21,23	2,74	-3,35
	top 0.5%	162	130.652	808.025	234.869	1.452.558	11,87	46,75	4,29	22,99	25,65	3,12	-2,80
	top 0.1%	32	80.162	2.478.835	109.222	3.377.463	5,52	27,86	3,04	32,87	36,65	1,11	-1,53
	top 10-5%		47.803		290.301		14,68
	top 5-1%		92.651		387.864		19,61
	top 1-0.5%		21.134		93.710		4,74
	top 0.5-0.1%		50.490		125.646		6,35
	top 0.1%		80.162		109.222		5,52
	F. Excluding

real estate. Individual distribution based on the survey assuming that wealth is divided equally between spouses

  : Computations based on tax returns and Bank of Spain, Encuesta Financiera de las Familias 2002. Notes: The number of total adults for the tax-based statistics (30,249 million) is smaller than the number of total adults for the survey-based statistics (32,339 million) because the former excludes País Vasco and Navarra.

			Total Financial Wealth	Total Wealth	Wealth Composition
	top 10%	3.234	339.119	104.865	87,53
	top 5%	1.617	288.455	178.396	74,46
	top 1%	323	178.137	550.848	45,98
	top 0.5%	162	143.099	885.002	36,94
	top 0.1%	32	86.684	2.680.503	22,37
	top 10-5%		50.664		13,08
	top 5-1%		110.318		28,48
	top 1-0.5%		35.038		9,04
	top 0.5-0.1%		56.415		14,56
	top 0.1%		86.684		22,37

Source

Table E3 . Aggregate Net Worth and Composition, Households Wealth Survey 2002 vs. Tax Statistics

 E3

			Tax Rate
	from	to	(%)
	100,001	120,000	1.00
	120,001	150,000	1.43
	150,001	200,000	2.00
	200,001	250,000	2.78
	250,001	300,000	3.42
	300,001	400,000	3.97
	400,001	500,000	4.86
	500,001	750,000	5.57
	750,001	1,000,000	6.84
	If rent exceeds 1,000,000:
	first 1,000,000		7.70
	excess		11.00
	80,001	100,000	1.00
	100,001	120,000	1.50
	120,001	150,000	1.93
	150,001	200,000	2.50
	200,001	250,000	3.28
	250,001	300,000	3.92
	300,001	400,000	4.47
	400,001	500,000	5.36
	500,001	750,000	6.07
	750,001	1,000,000	7.34
	If rent exceeds 1,000,000:
	first 1,000,000		8.20
	excess		11.00
	70,001	100,000	7.50
	100,001	250,000	18.00
	250,001	500,000	25.00
	500,001	1,000,000	30.00
	over 1,000,000		40.00
	60,001	100,000	7.50
	100,001	150,000	18.00
	150,001	250,000	20.00
	250,001	500,000	27.00
	500,001	1,000,000	33.00
	over 1,000,000		44.00
	100,001	125,000	2.50
	125,001	150,000	2.90
	150,001	175,000	3.85
	175,001	200,000	4.60
	200,001	250,000	5.90
	250,001	300,000	7.55
	300,001	400,000	10.05
	400,001	500,000	13.35
	500,001	600,000	16.65
	600,001	700,000	20.00
	700,001	800,000	23.30
	800,001	900,000	26.65
	900,001	1,000,000	29.85
	over 1,000,000		33.00
	100,001	125,000	2.50
	125,001	175,000	3.85
	175,001	200,000	4.60
	200,001	250,000	5.90
	250,001	300,000	7.55
	300,001	400,000	10.05
	400,001	500,000	13.35
	500,001	600,000	16.65
	600,001	700,000	20.00
	700,001	800,000	23.30
	800,001	900,000	26.65
	900,001	1,000,000	29.85
	1,000,001	2,000,000	33.00
	2,000,001	3,000,000	35.65
	3,000,001	4,000,000	37.75
	4,000,001	5,000,000	39.30
	5,000,001	6,000,000	42.00
	over 6,000,000		44.00
	0	100,000	15.00
	100,001	200,000	18.20
	200,001	300,000	26.60
	300,001	400,000	23.00
	400,001	500,000	25.40
	500,001	600,000	27.80
	600,001	700,000	30.50
	700,001	800,000	33.40
	800,001	900,000	36.30
	900,001	1,000,000	39.20
	1,000,001	1,100,000	42.10
	1,100,001	1,300,000	47.20
	1,300,001	1,600,000	56.10
	over 1,600,000		61.40

TABLE F1 . Income Tax Rates 1933-1973 Income level (pesetas)

 F1

		1933-1935
	# Tax returns	# Tax returns	# Inspected
		with positive taxable income	Files
	(1)	(2)	(3)
		1936-1940
		1941
		1942-1953
		1954-1956
		1957-1965
		1966-1973

Table F2 . Total Number of Tax Returns and Inspections: 1933-1974

 F2

		Income Tax	Wealth Tax
		# Tax Returns	# Inspected Files	# Tax Returns	# Inspected Files
		('000s)	('000s)	('000s)	('000s)
	1986	7,896	34.90	781
	1987	8,028	33.75	887	9.34
	1988	8,954	25.04	756	6.97
	1989	9,845	16.45	855	5.40
	1990	10,965	28.05	974	9.58
	1991	11,584	21.31	1,033	7.04
	1992	12,341	33.39	863	9.61
	1993	12,794	31.93	928	7.46
	1994	13,578	25.77	809	4.89
	1995	14,119	21.28	783	3.26
	1996	14,620	18.97	825	2.23
	1997	15,000	15.34	892	1.73
	1998	15,424	10.06	946	1.21
	1999	13,797	10.90	981	1.14
	2000	14,123	9.67	869	1.07
	2001	14,734	8.34	874	0.99
	2002	15,410	8.25	884	0.92
	Source: Agencia Tributaria, Memoria de Actividades

Table F3 . Number of Tax Inspections: 1986-2002

 F3 Tax on Rents: Contribución Rústica y Pecuaria, Contribución Urbana. Tax on Entrepreneurial Income: Contribución Industrial y de Comercio. Tax on Capital Income: Contribución sobre las Utilidades Procedentes del Capital. Tax on Wage Income: Contribución sobre las Utilidades del Trabajo Personal. Corporate Tax: Contribución sobre las Utilidades del Trabajo y del Capital. Personal Income Tax: Contribución General sobre la Renta (since 1932). Gift and Estate Tax: Contribución sobre Derechos Reales y Transmisión de Bienes 1958-1979: Tax on Rents: Contribución Rústica, Contribución Urbana. Tax on Entrepreneurial Income: Licencia Fiscal, Cuota de Beneficios. Tax on Capital Income: Impuesto sobre las Rentas del Capital. Tax on Wage Income: Impuesto sobre los Rendimientos del Trabajo Personal. Corporate Tax: Impuesto sobre las Sociedades; since 1975: Cuota sobre la Renta Global de las Sociedades. Personal Income Tax: Impuesto General sobre la Renta. Personal Income Tax: Impuesto General sobre la Renta. Gift and Estate Tax: Contribución sobre Derechos Reales y Transmisión de Bienes

	Total Taxes	Direct plus	Indirect Taxes	(14)	7.35	7.30	7.70	7.88	7.18	7.28					6.24	8.34	8.49	9.76	8.85	8.98	7.55	8.04	8.28	9.09	7.73	7.06	7.87	8.36	7.57	7.81	7.56	7.55	7.64	8.05	9.14	9.17	9.27	8.85	9.02	9.08	9.45	9.50	9.13	9.67	8.74	9.03	10.26	10.62	10.24	10.13	9.96	10.20	10.51	10.78
		Total	(9)-(12)	(13)	3.72	3.53	3.91	3.76	3.36	3.37					2.29	3.64	3.57	4.85	4.44	4.06	3.63	3.77	4.00	4.56	3.77	3.39	3.88	3.98	3.54	3.72	3.67	3.60	3.70	4.00	4.88	5.18	5.25	5.18	5.50	5.64	5.96	5.91	5.67	6.01	4.95	4.96	6.12	6.21	5.79	5.36	4.88	4.94	4.64	4.70
		Luxury		(12)												0.79	0.71	0.81	0.81	0.88	0.49	0.43	0.42	0.41	0.42	0.41	0.41	0.44	0.44	0.49	0.48	0.46	0.73	0.93	1.05	1.03	1.03	1.04	1.17	1.29	1.34	1.43	1.43	1.55	1.57	0.56	1.55	1.61	1.42	1.39	1.39	1.43	1.46	1.55
	Indirect Taxes	Tax Stamp Consumption		(10) (11)	1.04 0.98	0.99 1.03	1.08 1.16	1.19 1.08	1.04 0.94	1.11 0.94					0.85 0.97	0.93 1.44	0.51 1.64	0.94 2.10	0.85 1.96	0.83 1.82	0.84 1.67	0.91 1.76	0.88 2.02	0.89 2.73	0.79 2.10	0.72 1.89	0.79 2.26	0.79 2.30	0.57 2.10	0.59 2.20	0.59 2.02	0.71 2.09	0.68 1.81	0.72 1.84	0.73 2.02	0.71 1.80	0.69 1.66	0.71 1.54	0.87 1.37	1.18 0.91	1.32 0.77	1.41 0.88	1.44 0.85	1.53 0.86	0.44 0.89	1.66 0.91	1.64 0.84	1.68 0.76	1.73 0.64	1.47 0.54	1.33 0.45	1.31 0.38	1.29 0.45	1.37 0.37
		Customs		(9)	1.70	1.51	1.66	1.50	1.37	1.32					0.47	0.48	0.71	1.01	0.81	0.53	0.62	0.68	0.69	0.54	0.46	0.37	0.43	0.45	0.42	0.44	0.57	0.35	0.48	0.51	1.09	1.64	1.87	1.89	2.08	2.26	2.53	2.19	1.96	2.07	2.05	1.83	2.08	2.16	2.00	1.96	1.71	1.82	1.45	1.41
		Total	(1)-(7)	(8)	3.63	3.77	3.80	4.12	3.82	3.91					3.95	4.71	4.92	4.91	4.41	4.92	3.92	4.26	4.28	4.53	3.96	3.67	3.98	4.38	4.03	4.10	3.90	3.95	3.94	4.06	4.26	3.99	4.02	3.67	3.52	3.43	3.50	3.59	3.46	3.67	3.78	4.07	4.15	4.41	4.45	4.78	5.08	5.26	5.87	6.08
		Gifts and	Estate	(7)	0.62	0.64	0.59	0.64	0.63	0.62					1.28	0.98	0.89	0.88	0.71	0.79	0.67	0.78	0.78	0.67	0.61	0.59	0.63	0.61	0.58	0.63	0.58	0.59	0.63	0.67	0.68	0.66	0.66	0.66	0.65	0.55	0.56	0.60	0.60	0.64	0.66	0.70	0.75	0.84	0.85	0.79	0.74	0.72	0.74	0.73
		Corporate	Tax	(6)	0.36	0.40	0.32	0.37	0.27	0.31					0.19	0.61	0.71	0.75	0.71	0.85	0.74	0.80	0.87	1.01	0.97	0.88	1.12	1.34	1.14	1.21	1.18	1.20	1.15	1.24	1.20	1.15	1.12	0.97	0.88	0.92	0.96	0.98	0.92	1.05	1.02	1.05	1.05	1.06	1.05	1.10	1.12	1.05	0.92	1.16
		Personal	Income	(5)				0.03	0.04	0.04					0.04	0.06	0.15	0.17	0.18	0.19	0.18	0.17	0.18	0.19	0.17	0.13	0.15	0.18	0.17	0.10	0.11	0.13	0.13	0.17	0.18	0.16	0.16	0.16	0.16	0.15	0.14	0.15	0.16	0.15	0.14	0.17	0.16	0.17	0.13	0.14	0.15	0.13	0.22	2.52
		Wage	Income	(4)	0.39	0.40	0.41	0.43	0.44	0.47					0.52	0.62	0.66	0.75	0.72	0.81	0.73	0.77	0.81	0.86	0.78	0.73	0.75	0.87	0.81	0.71	0.67	0.78	0.74	0.76	0.87	0.82	0.80	0.76	0.73	0.66	0.80	0.83	0.74	0.79	0.89	1.01	1.09	1.28	1.41	1.60	1.78	2.09	2.73	1.14
		Capital	Income	(3)	0.58	0.62	0.60	0.65	0.63	0.63					0.44	0.50	0.52	0.46	0.39	0.47	0.36	0.44	0.38	0.60	0.34	0.34	0.35	0.36	0.35	0.42	0.49	0.50	0.48	0.37	0.41	0.39	0.38	0.32	0.31	0.38	0.32	0.33	0.34	0.34	0.36	0.39	0.38	0.38	0.33	0.45	0.68	0.68	0.73	0.31
		Rents Entrepreneurial	Income	(2) (1)	0.60 1930 1.08	0.60 1931 1.12	0.66 1932 1.21	0.69 1933 1.31	0.62 1934 1.20	0.61 1935 1.22	1936	1937	1938	1939	0.51 1940 0.99	0.82 1941 1.12	0.74 1942 1.25	0.71 1943 1.19	0.63 1944 1.07	0.67 1945 1.15	0.43 1946 0.81	0.44 1947 0.86	0.42 1948 0.83	0.40 1949 0.81	0.30 1950 0.79	0.34 1951 0.65	0.34 1952 0.64	0.35 1953 0.68	0.30 1954 0.68	0.30 1955 0.72	0.24 1956 0.62	0.22 1957 0.54	0.32 1958 0.48	0.40 1959 0.44	0.42 1960 0.50	0.39 1961 0.42	0.49 1962 0.40	0.46 1963 0.35	0.46 1964 0.33	0.47 1965 0.31	0.45 1966 0.25	0.47 1967 0.25	0.48 1968 0.22	0.45 1969 0.23	0.46 1970 0.26	0.47 1971 0.28	0.43 1972 0.29	0.39 1973 0.28	0.38 1974 0.30	0.42 1975 0.28	0.37 1976 0.25	0.36 1977 0.23	0.32 1978 0.22	0.20 1979 0.03	Source: Comín, F. (1985)	Notes	1930-1957:

TABLE G . Structure of Tax Revenues. Spain 1930-1979

 G Instituto de Estudios Fiscales, BADESPE-Base de Datos Económicos del Sector Público Español Note: Total tax receipts reduction in 2002 due to partial transfers of tax collections to Autonomous Regions.

			Total Taxes	Direct plus	Indirect Taxes	(12)	12.03	13.15	11.90	13.28	13.75	14.27	14.77	16.85	16.82	17.97	17.27	17.14	17.60	16.47	16.61	16.24	15.95	16.89	16.13	16.34	16.29	15.98	14.87	14.32	14.03	14.87
				Total	(7)-(10)	(11)	6.39	7.33	6.32	7.22	7.51	7.78	8.41	8.54	8.53	8.12	7.79	7.54	7.98	7.17	7.70	7.47	7.48	7.60	7.93	8.34	8.24	7.96	7.35	7.19	7.14	7.16
				Other	Taxes	(10)	2.83	3.11	2.86	3.51	3.21	3.52	2.07	0.88	0.82	0.49	0.45	0.14	0.22	0.16	0.15	0.18	0.14	0.19	0.24	0.23	0.23	0.29	0.24	0.23	0.22	0.23
	National Government Tax Receipts as % of GDP	Direct Taxes	Personal Wealth Corporate Gifts and Other Total Customs VAT Other Taxes on Source: Indirect Taxes Income Tax Tax Estate Taxes (1)-(5) Consumption (1) (2) (3) (4) (5) (6) (7) (8) (9) 1980 4.07 0.11 1.14 0.09 0.23 5.64 1.00 1.28 1.28 1981 4.34 0.08 1.12 0.11 0.17 5.82 1.00 1.61 1.61 1982 4.24 0.07 1.09 0.08 0.11 5.58 1.10 1.18 1.18 1983 4.56 0.06 1.24 0.09 0.11 6.06 1.16 1.27 1.27 1984 4.84 0.03 1.25 0.03 0.09 6.25 1.11 1.59 1.59 1985 4.98 0.03 1.37 0.02 0.09 6.49 1.22 1.52 1.52 1986 4.67 0.03 1.57 0.02 0.07 6.36 0.79 4.17 1.38 1987 6.43 0.03 1.77 0.02 0.05 8.31 0.94 4.81 1.91 1988 6.25 0.04 1.95 0.00 0.05 8.29 0.92 4.93 1.86 1989 7.07 0.03 2.71 0.04 0.00 9.85 0.81 5.00 1.82 1990 6.67 0.04 2.76 0.03 0.00 9.48 0.65 4.79 1.90 1991 7.18 0.04 2.40 -0.02 0.00 9.60 0.51 4.70 2.19 1992 7.54 0.04 2.05 0.00 0.00 9.62 0.34 5.07 2.35 1993 7.48 0.04 1.78 0.00 0.00 9.31 0.14 4.36 2.50 1994 7.25 0.04 1.61 0.00 0.00 8.91 0.14 4.73 2.68 1995 7.03 0.04 1.70 0.00 0.00 8.76 0.16 4.55 2.58 1996 6.68 0.04 1.75 0.00 0.00 8.47 0.13 4.60 2.62 1997 6.62 0.04 2.51 0.00 0.13 9.29 0.13 4.79 2.48 1998 5.57 0.04 2.59 0.00 0.00 8.21 0.15 4.86 2.67 1999 5.42 0.05 2.52 0.00 0.00 7.99 0.15 5.30 2.67 2000 5.27 0.05 2.73 0.00 0.00 8.05 0.15 5.30 2.56 2001 5.44 0.05 2.53 0.00 0.00 8.02 0.14 5.09 2.44 2002 4.57 0.00 2.94 0.00 0.00 7.51 0.13 4.76 2.22 2003 4.32 0.00 2.80 0.00 0.00 7.12 0.13 4.68 2.16 2004 3.79 0.00 3.10 0.00 0.00 6.89 0.15 4.68 2.09 2005 4.12 0.00 3.59 0.00 0.00 7.72 0.16 4.77 1.99

TABLE G (continued). Structure of Tax Revenues. Spain 1980-2005

 G

				Business
			Returns on	income
		Returns on	financial	(excluding		Employment
	Year	real estate	assets	farm)	Farm income	income	Other
	National Government Tax Receipts as % of GDP
	Direct Taxes

The appendix is available online at http://elsa.berkeley.edu/~saez/

The official publication exists since 1979 for the income tax and since 1981 for the wealth tax. However, the statistical quality of the data for the first years is defective with obvious and large inconsistencies which make the data non usable.

We also use the micro-data to produce estimates on top wage income shares as the microdata allow us to rank tax filers by size of wages and salaries.

In 1932, the list of all the Grandes de España (who were part of the land reform expropriation) was published in the Gaceta deMadrid (12/16/1932). Carrion, 1973, provides details of the land area owned by the largest estate proprietors among them. By comparing these lists and the income tax lists it turns out that 100% of owners of more than 3,000 hectares were income taxpayers (36 people). If proprietors of more than 1,000 hectares are considered (65 people), 92% are present in the tax lists. It should be pointed out that this does not imply that the missing 8% were necessarily evaders; in most cases their ascendants paid the income tax, which reflects different timing between land ownership transfers and nobility title transfers (due, for example, to male preference). Additionally, close inspection of the income tax lists shows that over one tenth of all taxpayers in 1933-1935 were either Grandes or close relatives.

The economic historian Francisco Comín reported to us a well-known story: during the final period of the dictatorship, the commission in charge of redesigning the income tax asked the fiscal authorities for the list of top taxpayers. Strikingly, the top of list consisted in famous bullfighters and show business stars rather than bankers or large business owners. Unfortunately, there does not seem to be any written reference on this and it is possible that the story has been widely exaggerated as it was told and re-told overtime. As just discussed, the published lists of taxpayers in 1933-1935 provide hard evidence that goes in the opposite direction.

Fiscal inspectors were highly regarded from a social point of view, and their work should not be questioned. Many of them have extensively written on income tax issues, asAlbiñana, 1969a,b, Albiñana et al., 1974[START_REF] Breña Cruz | La Administración del Impuesto General sobre la Renta[END_REF], Gota Losada, 1966[START_REF] Gota Losada | La Realidad de la Imposición Personal sobre la Renta[END_REF], Martí Basterrachea, 1974, and many others.

The land reform of the Second Republic was not successful in redistributing large land estates and was eventually abandoned (see[START_REF] Malefakis | Reforma Agraria y Revolución Campesina en la España del Siglo XX[END_REF][START_REF] Carrión | La Reforma Agraria de la Segunda República y la Situación Actual de la Agricultura Española[END_REF].

If tax evasion at the very top was higher in the 1930s than today, then this reinforces our finding that income concentration was higher in the 1930s. However, as we argued above, we

This is exactly true in the case of small tax changes. In the case of the relatively large change we are considering, this is only a first order approximation.

Unfortunately, we have not been able to obtain access to such data and it is unlikely that access could be obtained in the near future.

A result of this diminishing relevance is the inexistence of official statistics between 1961 and 1979.

The powerful banking and industrial sectors, with strong influence in the dictatorship of Franco, seem to have been the source of a systematic attempt to block any generalization of the Contribución sobre la Renta and to sustain the statu quo of the taxation scheme. See, for example,Albiñana, 1969a and[START_REF] Vallejo Pousada | El Impuesto sobre la Renta en España: antecedentes y evolución hasta 1978[END_REF], for details on how some private banks sketched income tax codes to be imposed to the government.

Capitalization rate was raised to 20% in 1999 (Law 50/1998).

In 1994 the fiscal authorities found it difficult to predict the results of the new exemptions (Memoria de la Administración Tributaria 1994, p. 124).

This is the standard method of Pareto interpolation used by[START_REF] Kuznets | Shares of Upper Income Groups in Income and Savings[END_REF] and[START_REF] Feenberg | Income Inequality and the Incomes of Very High Income Taxpayers: Evidence from Tax Returns[END_REF].

The differences between National Accounts and household surveys regarding income measurement have been analyzed in[START_REF] Deaton | Measuring Poverty in a Growing World (or Measuring Growth in a Poor World)[END_REF] and the Canberra Expert Group on Household Income Statistics (2001).

As an example, the magnitude of the corrections applied by these studies can be seen from the fact that, according to the 1980/1981 survey, the top 10% received 25.4% of income before any correction was made.

, and IEF (Madrid) for helpful comments and discussions. Financial support from the Fundación Carolina (Facundo Alvaredo) and the Sloan Foundation and NSF Grant SES-0134946 (Emmanuel Saez) is thankfully acknowledged.