From Political Calculations:
Having looked at how Greece arrived at its current crisis, we thought we'd turn to the next country that is coming to dominate the bad economic news in Europe: Spain.
Here's our chart showing the relationship between Spain's GDP per capita and its annual government tax collections and expenditures per capita for each year from 2000 through 2011:
Unlike
Greece, we find that the Spanish government's expenditures throughout
much of the period appeared to be stable, with the government running
significant surpluses in 2005 through 2007.
Unfortunately for Spain however, those surpluses were based on that country's large housing bubble,
which greatly increased the numbers of people paying the nation's
highest income tax rates as their incomes were highly inflated during
this period of time. We know this is the case because Spain's tax rates
throughout nearly all of this period were very stable, and essentially
unchanged from 2000 through 2010. The only way we would see this
pattern then is if the distribution of income in Spain during this time
shifted to increase the numbers and incomes of upper income earners, who
were benefiting from the bubble economy....MORE
See also: California
