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Do political incentives matter for tax policies? Ideology, opportunism and the tax structure

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Author Info
Konstantinos Angelopoulos
George Economides
Pantelis Kammas

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Abstract

This paper investigates the importance of political ideology and opportunism in the choice of the tax structure. In particular, we examine the effects of cabinet ideology and elections on the distribution of the tax burden across factors of production and consumption for 21 OECD countries over the period 1970-2000 by employing four alternative cabinet ideology measures and by using the methodology of effective tax rates. There is evidence of both opportunistic and partisan effects on tax policies. More precisely, we find that left-wing governments rely more on capital relative to labor income taxation and that they tend to increase consumption taxes. Moreover, we find that income tax rates (but not consumption taxes) tend to be reduced in pre-electoral periods and that capital effective tax rates (defined broadly to include taxes on self-employed income) are reduced by more than effective labor tax rates.

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Paper provided by Department of Economics, University of Glasgow in its series Working Papers with number 2009_12.

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Date of creation: Feb 2009
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Handle: RePEc:gla:glaewp:2009_12

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Related research
Keywords: tax structure; political economy; partisan and opportunistic effects;

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Find related papers by JEL classification:
H2 - Public Economics - - Taxation, Subsidies, and Revenue
H1 - Public Economics - - Structure and Scope of Government

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