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A probabilistic voting model of progressive taxation with incentive effects

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Author Info
Jenny de Freitas () (Universitat de les Illes Balears)
Abstract

The purpose of this work is to show under what conditions a marginally progressive income tax emerges as the result of political competition between two parties when labor is elastically supplied and candidates are uncertain about voters' decisions on election day. Assuming a decreasing wage elasticity of labor supply, if we follow Coughlin and Nitzan (1981), only marginal-rate progressive taxes are chosen by both candidates in equilibrium. If, instead, we adopt Lindbeck and Weibull’s (1987) probabilistic voting model, the equilibrium tax schedule will be progressive as long as the political power of the rich voter is sufficiently low. The degree of progressivity decreases with population polarization.

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Publisher Info
Article provided by IEF in its journal Hacienda Pública Española/Revista de Economía Pública.

Volume (Year): 190 (2009)
Issue (Month): 3 (September)
Pages: 9-26
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Handle: RePEc:hpe:journl:y:2009:v:190:i:3:p:9-26

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Related research
Keywords: Political economy; progressive taxation; elastic labor supply;

Find related papers by JEL classification:
D3 - Microeconomics - - Distribution
D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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  1. Marhuenda, Francisco & Ortuno-Ortin, Ignacio, 1995. "Popular support for progressive taxation," Economics Letters, Elsevier, vol. 48(3-4), pages 319-324, June. [Downloadable!] (restricted)
  2. Roland Benabou, 2000. "Unequal Societies: Income Distribution and the Social Contract," American Economic Review, American Economic Association, vol. 90(1), pages 96-129, March. [Downloadable!] (restricted)
  3. Francisco Marhuenda & Ignacio Ortuño Ortín, 1995. "Popular Support For Progressive Taxation," Working Papers. Serie AD 1995-15, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  4. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December. [Downloadable!] (restricted)
  5. Hindriks, Jean, 2001. "Is there a demand for income tax progressivity?," Economics Letters, Elsevier, vol. 73(1), pages 43-50, October. [Downloadable!] (restricted)
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  6. De Donder, Philippe & Hindriks, Jean, 2003. "The politics of progressive income taxation with incentive effects," Journal of Public Economics, Elsevier, vol. 87(11), pages 2491-2505, October. [Downloadable!] (restricted)
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  7. John E. Roemer, 1999. "The Democratic Political Economy of Progressive Income Taxation," Econometrica, Econometric Society, vol. 67(1), pages 1-20, January.
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  8. Carbonell-Nicolau, Oriol & Ok, Efe A., 2007. "Voting over income taxation," Journal of Economic Theory, Elsevier, vol. 134(1), pages 249-286, May. [Downloadable!] (restricted)
  9. Coughlin, Peter & Nitzan, Shmuel, 1981. "Electoral outcomes with probabilistic voting and Nash social welfare maxima," Journal of Public Economics, Elsevier, vol. 15(1), pages 113-121, February. [Downloadable!] (restricted)
  10. Grossman, Gene M & Helpman, Elhanan, 1996. "Electoral Competition and Special Interest Politics," Review of Economic Studies, Blackwell Publishing, vol. 63(2), pages 265-86, April. [Downloadable!] (restricted)
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  11. Laussel, Didier & Le Breton, Michel, 2002. "Unidimensional Downsian politics: median, utilitarian or what else?," Economics Letters, Elsevier, vol. 76(3), pages 351-356, August. [Downloadable!] (restricted)
  12. Carbonell-Nicolau, Oriol & Klor, Esteban F., 2003. "Representative democracy and marginal rate progressive income taxation," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 2339-2366, September. [Downloadable!] (restricted)
    Other versions:
  13. Georges Casamatta & Helmuth Cremer & Pierre Pestieau, 2006. "Is there a Political Support for the Double Burden on Prolonged Activity?," Economics of Governance, Springer, vol. 7(2), pages 143-154, May. [Downloadable!] (restricted)
    Other versions:
  14. Romer, Thomas, 1975. "Individual welfare, majority voting, and the properties of a linear income tax," Journal of Public Economics, Elsevier, vol. 4(2), pages 163-185, February. [Downloadable!] (restricted)
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This page was last updated on 2009-11-26.

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