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Voting and Nonlinear Taxes in a Stylized Representative Democracy

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  • Henning Bohn
  • Charles Stuart

Abstract

We derive median-voter results and study the shape of redistributional taxes when voters elect a candidate who imposes taxes to maximize own utility. Under general conditions, a median-productivity candidate is a Condorcet winner. The imposed tax function is nonlinear, may place high marginal rates on very low incomes, and may have an interval of negative marginal rates below the income of the winning candidate. Marginal rates are positive throughout, however, if non-redistributional spending or altruism toward the poor are great enough.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1058.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_1058

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  1. Stacy Dickert & Scott Houser & John Karl Scholz, 1995. "The Earned Income Tax Credit and Transfer Programs: A Study of Labor Market and Program Participation," NBER Chapters, in: Tax Policy and the Economy, Volume 9, pages 1-50 National Bureau of Economic Research, Inc.
  2. Michael P. Keane & Robert Moffitt, 1995. "A structural model of multiple welfare program participation and labor supply," Working Papers 557, Federal Reserve Bank of Minneapolis.
  3. Bénabou, Roland & Ok, Efe A, 1998. "Social Mobility and the Demand for Redistribution: the POUM Hypothesis," CEPR Discussion Papers 1955, C.E.P.R. Discussion Papers.
  4. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
  5. 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.
  6. Martin J. Osborne & Al Slivinksi, 1995. "A Model of Political Competition with Citizen-Candidates," Department of Economics Working Papers 1995-01, McMaster University.
  7. Brito, Dagobert L & Oakland, William H, 1977. "Some Properties of the Optimal Income-Tax," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(2), pages 407-23, June.
  8. Miguel Gouveia, 1997. "Majority rule and the public provision of a private good," Public Choice, Springer, vol. 93(3), pages 221-244, December.
  9. Ebert, Udo, 1992. "A reexamination of the optimal nonlinear income tax," Journal of Public Economics, Elsevier, vol. 49(1), pages 47-73, October.
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Cited by:
  1. Lars P. Feld & Justina A.V. Fischer & Gebhard Kirchgässner, 2006. "The Effect of Direct Democracy on Income Redistribution: Evidence for Switzerland," CESifo Working Paper Series 1837, CESifo Group Munich.
  2. Esteban Klor, 2002. "A Positive Model of Overlapping Income Taxation in a Federation of States," Wallis Working Papers WP32, University of Rochester - Wallis Institute of Political Economy.
  3. Michael Keen & Yitae Kim & Ricardo Varsano, 2008. "The “flat tax(es)”: principles and experience," International Tax and Public Finance, Springer, vol. 15(6), pages 712-751, December.
  4. Klor, Esteban F., 2006. "A positive model of overlapping income taxation in a federation of states," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 703-723, May.
  5. Miroslav Beblavý, 2011. "Why has the crisis been bad for private pensions, but good for the flat tax? The sustainability of ‘neoliberal’ reforms in the new EU member states," CEPS Papers 6313, Centre for European Policy Studies.
  6. Casamatta, Georges & Cremer, Helmuth & De Donder, Philippe, 2008. "Repeated electoral competition over non-linear income tax schedules," CEPR Discussion Papers 7054, C.E.P.R. Discussion Papers.

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