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Reforming a complicated income tax system: The political economics perspective

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Abstract

In this paper we analyze the political economics of different strategies to implement revenue neutral reforms of a complicated income tax system (�tax-cut-cum-base-broadening�). We set up a straightforward social choice model where individuals initially have two deduction possibilities from the tax base. The government wants to cut back the tax base exemptions and it can do so symmetrically or asymmetrically. Asymmetrical approaches face the difficulty that even such individuals can vote against an isolated cut (or an abolishment) of a single tax concession who benefit below average from it. In some constellations a symmetrical cut is in fact the only politically feasible option, whereas all asymmetrical reforms would not be supported by the public.

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File URL: http://www2.vwl.wiso.uni-goettingen.de/departmentpaper/NO_120.pdf
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Bibliographic Info

Paper provided by University of Goettingen, Department of Economics in its series Departmental Discussion Papers with number 120.

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Length: 13
Date of creation: 01 Jan 2004
Date of revision:
Handle: RePEc:got:vwldps:120

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Keywords: income tax reform; public choice;

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References

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  1. Jens Suedekum & Peter Ruehmann, 2003. "Severance Payments and Firm-specific Human Capital," LABOUR, CEIS, vol. 17(1), pages 47-62, 03.
  2. Sieg, Gernot, 2001. "A political business cycle with boundedly rational agents," European Journal of Political Economy, Elsevier, vol. 17(1), pages 39-52, March.
  3. Tim Krieger, 2001. "Intergenerational Redistribution and Labor Mobility: A Survey," Departmental Discussion Papers 106, University of Goettingen, Department of Economics.
  4. Andreas Haufler & Michael Pflüger, 2001. "International Commodity Taxation Under Monopolistic Competition," CESifo Working Paper Series 529, CESifo Group Munich.
  5. Andreas Haufler & Guttorm Schjelderup & Frank Stähler, 2000. "Commodity Taxation and International Trade in Imperfect Markets," CESifo Working Paper Series 376, CESifo Group Munich.
  6. Jens Suedekum, 2005. "Increasing returns and spatial unemployment disparities," Papers in Regional Science, Wiley Blackwell, vol. 84(2), pages 159-181, 06.
  7. Barbaro, Salvatore, 2002. "The distributional impact of subsidies to higher education: empirical evidence from Germany," FiBS-Forum 11, Forschungsinstitut für Bildungs- und Sozialökonomie (FiBS).
  8. Onozaki, Tamotsu & Sieg, Gernot & Yokoo, Masanori, 2003. "Stability, chaos and multiple attractors: a single agent makes a difference," Journal of Economic Dynamics and Control, Elsevier, vol. 27(10), pages 1917-1938, August.
  9. Jens Südekum, 2001. "Home Goods and Regional Price Indices: A Perspective from New Economic Geography," Departmental Discussion Papers 109, University of Goettingen, Department of Economics.
  10. Salvatore Barbaro, 2002. "The Distributional Impact of Subsidies to Higher Education - Empirical Evidence from Germany," Departmental Discussion Papers 114, University of Goettingen, Department of Economics.
  11. Christoph Sauer & Margit Schratzenstaller, 2002. "Strategies Of International Fiscal Competition For Foreign Direct Investment In A Model With Impure Public Inputs," Departmental Discussion Papers 115, University of Goettingen, Department of Economics.
  12. Johann Graf Lambsdorff & Sitki Utku Teksoz, 2002. "Corrupt Relational Contracting," Departmental Discussion Papers 113, University of Goettingen, Department of Economics.
  13. Salvatore Barbaro, 2003. "The Combined Effect of Taxation and Subsidization on Human Capital Investment," Departmental Discussion Papers 116, University of Goettingen, Department of Economics.
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Cited by:
  1. Petra Enß & Robert Schwager, 2006. "Kommunaler Finanzausgleich und Gewerbesteuerhebesätze in Niedersachsen," Departmental Discussion Papers 127, University of Goettingen, Department of Economics.
  2. Sascha Wolff, 2006. "Migration und ihre Determinanten im ost-westdeutschen Kontext nach der Wiedervereinigung: Ein Literaturüberblick," Departmental Discussion Papers 130, University of Goettingen, Department of Economics.

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