Tax Compliance and Income Redistribution. A Political Competition Model
AbstractThis paper analyzes the political economy of income redistribution when voters are concerned about tax compliance. We consider a two stagemodel where there is a two party competition over the tax rate in the first stage and voters decide about their level of tax compliance in the second stage. We model political competition à la Wittman with the ideology of parties endogenously determined at equilibrium. We calibrate the model for an average of EU-27 countries. Numerical simulations provide the tax rates proposed by the two parties and the level of tax compliance. We find that a decrease in confidence in tax morale, and an increase in parties’ uncertainty about the preferences of the median voter increase the probability that the party offering the lowest income tax will win and decrease tax compliance.
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Bibliographic InfoPaper provided by Department of Economic Theory and Economic History of the University of Granada. in its series ThE Papers with number 13/06.
Length: 23 pages
Date of creation: 09 Jul 2013
Date of revision:
tax evasion; ideological parties; income redistribution; ethical voters.;
Find related papers by JEL classification:
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-20 (All new papers)
- NEP-CDM-2013-07-20 (Collective Decision-Making)
- NEP-IUE-2013-07-20 (Informal & Underground Economics)
- NEP-PBE-2013-07-20 (Public Economics)
- NEP-POL-2013-07-20 (Positive Political Economics)
- NEP-PUB-2013-07-20 (Public Finance)
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