Tax Evasion and Government Size - A Micro-Political Theory
AbstractPrevious studies on tax evasion and government size have not specified the "political mechanism" through which increasing difficulties with tax evasion might lead to government expansion. This paper attempts to fill in the gap. We extend the celebrated Meltzer and Richard (1981) model to a plausible world where tax evasion is possible. It is shown in this extended model that: (i) the decisive voter is still the individual who has a median pre-tax income, and (ii) the presence of tax evasion will lower the redistributive benefit of taxation and enhance the distortionary cost of taxation facing the decisive voter at the margin. As tax evasion becomes increasingly difficult with "modernization," the marginal redistributive benefit of taxation will be enhanced and the marginal distortionary cost of taxation will be mitigated. This provides tax-evasion routes with a micro-political foundation to explain the expansion of government.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by College of Business, Feng Chia University, Taiwan in its journal Journal of Economics and Management.
Volume (Year): 2 (2006)
Issue (Month): 1 (January)
tax evasion; political economy; government size; median;
Find related papers by JEL classification:
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October.
- Gans, Joshua S. & Smart, Michael, 1996. "Majority voting with single-crossing preferences," Journal of Public Economics, Elsevier, vol. 59(2), pages 219-237, February.
- Persson, Torsten & Tabellini, Guido, 1999.
"Political Economics and Public Finance,"
CEPR Discussion Papers
2235, C.E.P.R. Discussion Papers.
- Torsten Persson & Guido Tabellini, . "Political Economics and Public Finance," Working Papers 149, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Torsten Persson & Guido Tabellini, 1999. "Political Economics and Public Finance," NBER Working Papers 7097, National Bureau of Economic Research, Inc.
- Macho-Stadler, Ines & Perez-Castrillo, J David, 1997. "Optimal Auditing with Heterogeneous Income," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(4), pages 951-68, November.
- Tanzi,Vito & Schuknecht,Ludger, 2000.
"Public Spending in the 20th Century,"
Cambridge University Press, number 9780521664103, December.
- Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
- Andreoni, J. & Erard, B. & Feinstein, J., 1996.
9610r, Wisconsin Madison - Social Systems.
- Itsumi, Yoshitaka, 1974. "Distributional Effects of Linear Income Tax Schedules," Review of Economic Studies, Wiley Blackwell, vol. 41(3), pages 371-81, July.
- Peltzman, Sam, 1980.
"The Growth of Government,"
Journal of Law and Economics,
University of Chicago Press, vol. 23(2), pages 209-87, October.
- Sam Peltzman, 1980. "The Growth of Government," University of Chicago - George G. Stigler Center for Study of Economy and State 1, Chicago - Center for Study of Economy and State.
- Pencavel, John H., 1979. "A note on income tax evasion, labor supply, and nonlinear tax schedules," Journal of Public Economics, Elsevier, vol. 12(1), pages 115-124, August.
- Glen Ueng, K. L. & Yang, C. C., 2001. "Plea bargaining with the IRS: extensions and further results," Journal of Public Economics, Elsevier, vol. 81(1), pages 83-98, July.
- Slemrod, Joel & Yitzhaki, Shlomo, 2002.
"Tax avoidance, evasion, and administration,"
Handbook of Public Economics,
in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 22, pages 1423-1470
- Watson, Harry, 1985. "Tax evasion and labor markets," Journal of Public Economics, Elsevier, vol. 27(2), pages 231-246, July.
- 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.
- Browning, Edgar K & Johnson, William R, 1984. "The Trade-Off between Equality and Efficiency," Journal of Political Economy, University of Chicago Press, vol. 92(2), pages 175-203, April.
- Lin, Wen-Zhung & Yang, C. C., 2001. "A dynamic portfolio choice model of tax evasion: Comparative statics of tax rates and its implication for economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 25(11), pages 1827-1840, November.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jui-Fen Lin).
If references are entirely missing, you can add them using this form.