This paper studies tax-minimizing behavior of wealthy individuals in Spain. Drawing on the universe of inheritance tax returns filed in Catalonia, I study tax-minimizing strategies to an increase in the effective tax rates faced by heirs at the top 5% of the inheritance distribution. To identify causal effects, I use a difference-in-difference design comparing wealthy descendants to spouse inheritors who were barely affected by the policy change. After the tax reform, wealthy descendants inherit a higher fraction of tax-favoured assets and report lower taxable inheritances. This shift in the asset composition of inheritances is explained by a sharp increase in the proportion of wealthy descendants inheriting equity shares in family businesses. The rise in equity shares is not mirrored by a parallel increase in real assets needed to operate a business, suggesting that wealthy testators create family business to relabel financial or/and real estate assets into business wealth by using these assets as paid-in capital. The change in the asset composition of inheritances accounts for 52% of the forgone tax revenue associated with the behavioral responses elicited by the reform.

This paper studies the impact of inheritance taxation on intragenerational wealth mobility. To do so, I exploit rich variation in tax rates across Spanish regions resulting from the decentralization of this tax to regional governments. Using household panel data from the Spanish Survey of Household Finances, I document that higher inheritance taxes significantly and persistently reduce heirs’ wealth mobility at the lower part of the net wealth distribution. These wealth mobility responses to higher taxes are explained by less wealthy heirs decreasing their financial wealth and increasing their personal credit debt. Liquidity constraints and some particularities of the tax enforcement help rationalize the rise in personal credit debt at the time of the tax payment. Illiquidity of inheritances helps explain the lasting negative effects of taxes on bottom-wealth mobility, as delays in selling inherited real estate amplify the negative effects of taxes on personal credit debt and financial wealth of less wealthy heirs. 

Media: Spanish [Nada es Gratis] [El Confidencial]

We exploit the Spanish Christmas lottery and consumer confidence survey data to investigate the impact of highly geographically clustered lottery winnings on consumer sentiment and durable consumption. Albeit not receiving lottery prizes, consumers in winning provinces become significantly more optimistic about the Spanish macroeconomic conditions than those living elsewhere. This variation in sentiment is shown to be orthogonal to changes in regional fundamentals and leads to a rise in spending intentions. Young, less educated, low-income, and unemployed individuals react stronger to the lottery shock. At the regional level, lottery wins significantly increase car licenses, reduce unemployment, and intensify job creation and prices.

Media: English [VoxEU Column] ; Spanish [Nada es Gratis] [Cinco Días]