IEB Report

Political Economy

Tax reform

IEB Report 2/2013

Lawrence Summers, former Secretary of the U.S. Treasury and Professor of Economics at Harvard, has drawn parallels between the evolution of the tax system and the family garage.When the family moves to a new house, the garage is quite uncluttered and the family cars t easily. Over the years, the family begins to use the garage to store more and more junk. Until the day arrives when it is dif cult to park the cars in the garage because of all the accumulated clutter and, so, the family decides to get rid of everything they no longer need by organizing a garage sale. A fundamental tax reform has a lot in common with these garage sales.Although Spanish homes and garages are very different, and there is no tradition of holding yard sales to get rid of useless junk, we believe that this comparison is highly illustrative of what is happening to the Spanish tax system.The system needs to be completely overhauled. In this regard, Spain is no different.