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Majority voting and the welfare implications of tax avoidance

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  • Traxler, Christian

Abstract

A benchmark result in the political economy of taxation is that majority voting over a linear income tax schedule will result in an inefficiently high tax rate whenever the median voter has a below-average income. The present paper examines the role of tax avoidance for this welfare result. For a right-skewed distribution of taxed income, we show that the political distortion from majority voting is increasing in the median voter's avoidance. Vice versa, keeping the decisive voter's avoidance constant, the political inefficiency is decreasing in the average level of avoidance in the economy.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 96 (2012)
Issue (Month): 1 ()
Pages: 1-9

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Handle: RePEc:eee:pubeco:v:96:y:2012:i:1:p:1-9

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Web page: http://www.elsevier.com/locate/inca/505578

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Keywords: Tax avoidance; Welfare analysis; Majority voting; Median voter equilibrium;

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Citations

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Cited by:
  1. Ángel Solano García, 2014. "Fairness in Tax compliance: A Political Competition Model," ThE Papers 14/02, Department of Economic Theory and Economic History of the University of Granada..
  2. Adam, Antonis & Kammas, Pantelis, 2012. "(Tax evasion) power to the people: does "early democratization" increase the size of the informal sector?," MPRA Paper 43343, University Library of Munich, Germany.
  3. Weinreich, Daniel, 2013. "Fair tax evasion and majority voting over redistributive taxation," MPRA Paper 48919, University Library of Munich, Germany.
  4. Bethencourt, Carlos & Kunze, Lars, 2013. "The political economics of redistribution, inequality and tax avoidance," MPRA Paper 51127, University Library of Munich, Germany.
  5. Barnett, Richard C. & Bhattacharya, Joydeep & Bunzel, Helle, 2013. "Voting for income-immiserizing redistribution in the Meltzer-Richard model," Staff General Research Papers 36600, Iowa State University, Department of Economics.
  6. Barnett, Richard & Bhattacharya, Joydeep & Bunzel, Helle, 2012. "Voting for immiserizing income redistribution in the Meltzer-Richard model," School of Economics Working Paper Series 2012-15, LeBow College of Business, Drexel University.

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