IDEAS home Printed from https://ideas.repec.org/a/kap/pubcho/v126y2006i1p107-134.html
   My bibliography  Save this article

The political economics of not paying taxes

Author

Listed:
  • Jesper Roine

Abstract

This paper considers redistributive as well as political consequences of tax avoidance. When tax avoidance is possible, the official tax rate does not necessarily correspond to what individuals actually pay. This affects both redistributive outcomes as well as political attitudes towards taxation. Depending on the avoidance technology different political equilibria emerge. When the avoidance possibilities are limited, the classical conflict between rich and poor is sustained. If the tax avoidance technology is more effective, however, the equilibrium outcome can change to a situation where a coalition of poor and the very richest favor a higher tax rate. Comparing the model predictions with data on income inequality and evidence of avoidance activity, it comes surprisingly close to actual observations. Copyright Springer Science + Business Media, Inc. 2006

Suggested Citation

  • Jesper Roine, 2006. "The political economics of not paying taxes," Public Choice, Springer, vol. 126(1), pages 107-134, January.
    • Handle: RePEc:kap:pubcho:v:126:y:2006:i:1:p:107-134
    DOI: 10.1007/s11127-006-6071-6
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11127-006-6071-6
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11127-006-6071-6?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Persson, Torsten & Tabellini, Guido, 1994. "Representative democracy and capital taxation," Journal of Public Economics, Elsevier, vol. 55(1), pages 53-70, September.
    2. 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, Elsevier.
    3. Agell, Jonas & Persson, Mats, 2000. "Tax arbitrage and labor supply," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 3-24, October.
    4. Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(2), pages 465-490.
    5. James Andreoni & Brian Erard & Jonathan Feinstein, 1998. "Tax Compliance," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 818-860, June.
    6. Persson, Torsten & Tabellini, Guido, 1999. "Political economics and macroeconomic policy," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 22, pages 1397-1482, Elsevier.
    7. 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.
    8. Roland Benabou, 2000. "Unequal Societies: Income Distribution and the Social Contract," American Economic Review, American Economic Association, vol. 90(1), pages 96-129, March.
    9. Joel Slemrod, 2001. "A General Model of the Behavioral Response to Taxation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 8(2), pages 119-128, March.
    10. Peter Gottschalk & Timothy M. Smeeding, 1997. "Cross-National Comparisons of Earnings and Income Inequality," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 633-687, June.
    11. Lang, Oliver & Nohrba[ss], Karl-Heinz & Stahl, Konrad, 1997. "On income tax avoidance: the case of Germany," Journal of Public Economics, Elsevier, vol. 66(2), pages 327-347, November.
    12. Mayshar, Joram, 1991. " Taxation with Costly Administration," Scandinavian Journal of Economics, Wiley Blackwell, vol. 93(1), pages 75-88.
    13. Agell, Jonas & Englund, Peter & Sodersten, Jan, 1996. "Tax Reform of the Century -- the Swedish Experiment," National Tax Journal, National Tax Association;National Tax Journal, vol. 49(4), pages 643-664, December.
    14. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
    15. Epple, Dennis & Romano, Richard E., 1996. "Ends against the middle: Determining public service provision when there are private alternatives," Journal of Public Economics, Elsevier, vol. 62(3), pages 297-325, November.
    16. Paul, Gilles Saint & Verdier, Thierry, 1996. "Inequality, redistribution and growth: A challenge to the conventional political economy approach," European Economic Review, Elsevier, vol. 40(3-5), pages 719-728, April.
    17. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
    18. 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 914-927, October.
    19. Gordon, Roger H. & Bo Nielsen, Soren, 1997. "Tax evasion in an open economy:: Value-added vs. income taxation," Journal of Public Economics, Elsevier, vol. 66(2), pages 173-197, November.
    20. Raquel Fernandez & Richard Rogerson, 1995. "On the Political Economy of Education Subsidies," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(2), pages 249-262.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Carlos Bethencourt & Lars Kunze, 2015. "The political economics of redistribution, inequality and tax avoidance," Public Choice, Springer, vol. 163(3), pages 267-287, June.
    2. Rainald Borck, 2007. "Voting, Inequality And Redistribution," Journal of Economic Surveys, Wiley Blackwell, vol. 21(1), pages 90-109, February.
    3. Holger Strulik, 2007. "A distributional theory of government growth," Public Choice, Springer, vol. 132(3), pages 305-318, September.
    4. Rainald Borck, 2009. "Voting on redistribution with tax evasion," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 32(3), pages 439-454, March.
    5. Campante, Filipe R., 2011. "Redistribution in a model of voting and campaign contributions," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 646-656, August.
    6. Ryo Arawatari & Tetsuo Ono, 2009. "The Political Economy of Social Security and Public Goods Provision in a Borrowing-constrained Economy," Discussion Papers in Economics and Business 09-38, Osaka University, Graduate School of Economics.
    7. Dan Anderberg, 2007. "Inefficient households and the mix of government spending," Public Choice, Springer, vol. 131(1), pages 127-140, April.
    8. Ryo Arawatari & Tetsuo Ono, 2015. "Redistributive Politics And Government Debt In A Borrowing-Constrained Economy," Bulletin of Economic Research, Wiley Blackwell, vol. 67(1), pages 83-103, January.
    9. César Martinelli & John Duggan, 2014. "The Political Economy of Dynamic Elections: A Survey and Some New Results," Working Papers 1403, Centro de Investigacion Economica, ITAM.
    10. Margarita Katsimi & Thomas Moutos, 2004. "Monopoly, Inequality and Redistribution via the Public Provision of Private Goods," CESifo Working Paper Series 1318, CESifo.
    11. Bellettini, Giorgio & Berti Ceroni, Carlotta, 2007. "Income distribution, borrowing constraints and redistributive policies," European Economic Review, Elsevier, vol. 51(3), pages 625-645, April.
    12. Tetsuo Ono, 2016. "Inequality and the politics of redistribution," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(2), pages 191-217, April.
    13. Oliver Pamp & Philipp Mohl, 2008. "Income Inequality and Redistributional Spending: An Empirical Investigation of Competing Theories," LIS Working papers 491, LIS Cross-National Data Center in Luxembourg.
    14. Tetsuo Ono, 2012. "Inequality Dynamics and the Politics of Redistribution," Discussion Papers in Economics and Business 12-09-Rev, Osaka University, Graduate School of Economics, revised Nov 2013.
    15. Rafael Salas & Juan Rodríguez, 2013. "Popular support for social evaluation functions," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 40(4), pages 985-1014, April.
    16. Acemoglu, Daron, 2008. "Oligarchikus és demokratikus társadalmak [Oligarchic versus democratic societies]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 622-659.
    17. Daron Acemoglu & Suresh Naidu & Pascual Restrepo & James A. Robinson, 2013. "Democracy, Redistribution and Inequality," NBER Working Papers 19746, National Bureau of Economic Research, Inc.
    18. Hans Grüner, 2009. "Inequality and Political Consensus," Theory and Decision, Springer, vol. 67(3), pages 239-265, September.
    19. Grüner, Hans Peter, 2003. "Inequality and Political Consensus," CEPR Discussion Papers 4159, C.E.P.R. Discussion Papers.
    20. Traxler, Christian, 2012. "Majority voting and the welfare implications of tax avoidance," Journal of Public Economics, Elsevier, vol. 96(1), pages 1-9.

    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:pubcho:v:126:y:2006:i:1:p:107-134. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.