Income taxation, uncertaintly and stability
AbstractThis paper develops a political model to analyze the stability of income tax schedules. It isassumed that agents perceive any proposed alternative tax policy as more uncertain than thestatus quo. A tax policy is stable if it is a Condorcet winner. It is well known that in a modelwithout uncertainty the existence of such a policy is very rare. We show, however, that in realcases this might not be a serious problem since small amounts of uncertainty can bring stabilityto the status quo. It is also shown that linear tax functions can only be stable in economies withvery egalitarian income distributions and high taxation levels.
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Bibliographic InfoPaper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 1997-07.
Length: 22 pages
Date of creation: Mar 1997
Date of revision:
Publication status: Published by Ivie
Majority voting; income taxation; uncertainty;
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