Fiscal devaluation boosts Portuguese economy by 1%, sparks tax reform debate
A study looked at how changing taxes in Portugal could affect the economy in the long run. They found that swapping certain taxes could increase income by up to 1%, as long as there are no cost of living adjustments. This increase in income comes from a broader tax base with fewer distortions, leading to more private capital accumulation. However, if everyone affected by the tax change is fully compensated, the income increase is only 0.7% and public debt doesn't change much. Bigger tax changes don't necessarily lead to bigger income gains. Overall, changing taxes might not be the best way to boost the economy, as it only slightly reduces the overall labor tax burden. Policymakers might need to consider other ways to improve tax systems.