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A probabilistic voting model of progressive taxation with incentive effects

Author

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  • 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.

Suggested Citation

  • Jenny de Freitas, 2009. "A probabilistic voting model of progressive taxation with incentive effects," Hacienda Pública Española / Review of Public Economics, IEF, vol. 190(3), pages 9-26, September.
    • Handle: RePEc:hpe:journl:y:2009:v:190:i:3:p:9-26
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Political economy; progressive taxation; elastic labor supply;
    All these keywords.

    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 - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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