Voting over Taxes: The Case of Tax Evasion
AbstractThis paper studies majority voting on taxes when tax evasion is possible. We characterize the voting equilibrium where the agent with median taxed income is pivotal. Since the ranking of true incomes does not necessarily correspond to the ranking of taxed incomes, the decisive voter can differ from the median income receiver. In this case, we find unconventional patterns of redistribution, e.g. from the middle class to the poor and the rich. Furthermore, we show that majority voting can lead to an inefficiently low level of taxation – despite a right-skewed income distribution. Hence, the classical over-provision result might turn around, once tax evasion is taken into account.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Munich, Department of Economics in its series Discussion Papers in Economics with number 1188.
Date of creation: Sep 2006
Date of revision:
Majority Voting; Tax Evasion; Welfare Analysis; Redistribution;
Other versions of this item:
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
- D6 - Microeconomics - - Welfare Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-09-23 (All new papers)
- NEP-CDM-2006-09-23 (Collective Decision-Making)
- NEP-PBE-2006-09-23 (Public Economics)
- NEP-POL-2006-09-23 (Positive Political Economics)
- NEP-PUB-2006-09-23 (Public Finance)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Tyran, Jean-Robert & Sausgruber, Rupert, 2006.
"A little fairness may induce a lot of redistribution in democracy,"
European Economic Review,
Elsevier, vol. 50(2), pages 469-485, February.
- Jean-Robert Tyran & Rupert Sausgruber, 2002. "A Little Fairness may Induce a Lot of Redistribution in Democracy," University of St. Gallen Department of Economics working paper series 2002 2002-30, Department of Economics, University of St. Gallen.
- Yitzhaki, Shlomo, 1974. "Income tax evasion: A theoretical analysis," Journal of Public Economics, Elsevier, vol. 3(2), pages 201-202, May.
- Clotfelter, Charles T, 1983. "Tax Evasion and Tax Rates: An Analysis of Individual Returns," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 363-73, August.
- Rudiger Ahrend & Carlos Winograd, 2006.
"The Political Economy of Mass Privatisation and Imperfect Taxation: Winners and Losers,"
Documents de recherche
06-02, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
- Rudiger Ahrend & Carlos Winograd, 2006. "The political economy of mass privatisation and imperfect taxation: Winners and loosers," Public Choice, Springer, vol. 126(1), pages 201-224, January.
- Kopczuk, Wojciech, 2001. "Redistribution when avoidance behavior is heterogeneous," Journal of Public Economics, Elsevier, vol. 81(1), pages 51-71, July.
- Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
- Lindsay Tedds, 2010.
"Estimating the income reporting function for the self-employed,"
Springer, vol. 38(3), pages 669-687, June.
- Tedds, Lindsay, 2007. "Estimating the Income Reporting Function for the Self-Employed," MPRA Paper 4212, University Library of Munich, Germany.
- Cremer, Helmuth & Gahvari, Firouz, 1993. "Tax evasion and optimal commodity taxation," Journal of Public Economics, Elsevier, vol. 50(2), pages 261-275, February.
- 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.
- Miguel Gouveia, 1997.
"Majority rule and the public provision of a private good,"
Springer, vol. 93(3), pages 221-244, December.
- Gouveia, Miguel, 1997. " Majority Rule and the Public Provision of a Private Good," Public Choice, Springer, vol. 93(3-4), pages 221-44, December.
- Slemrod,Joel, 1997.
"Tax Progressivity and Income Inequality,"
Cambridge University Press, number 9780521587761, April.
- Joel Slemrod, 1998.
"A General Model of the Behavioral Response to Taxation,"
NBER Working Papers
6582, National Bureau of Economic Research, Inc.
- Joel Slemrod, 2001. "A General Model of the Behavioral Response to Taxation," International Tax and Public Finance, Springer, vol. 8(2), pages 119-128, March.
- Juin-jen Chang & Ching-chong Lai, 2004. "Collaborative tax evasion and social norms: why deterrence does not work," Oxford Economic Papers, Oxford University Press, vol. 56(2), pages 344-368, April.
- Joel Slemrod, 2007. "Cheating Ourselves: The Economics of Tax Evasion," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 25-48, Winter.
- Klarita G�rxhani, 2004. "The Informal Sector in Developed and Less Developed Countries: A Literature Survey," Public Choice, Springer, vol. 120(3_4), pages 267-300, 09.
- Roine, Jesper, 2003. "Voting over tax schedules in the presence of tax avoidance," Working Paper Series in Economics and Finance 529, Stockholm School of Economics.
- Cowell, F A, 1990. "Tax Sheltering and the Cost of Evasion," Oxford Economic Papers, Oxford University Press, vol. 42(1), pages 231-43, January.
- Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
- Epple, Dennis & Romano, Richard E., 1996. "Ends against the middle: Determining public service provision when there are private alternatives," Journal of Public Economics, Elsevier, vol. 62(3), pages 297-325, November.
- Carlo V Fiorio & Francesco D'Amuri, 2005. "Workers' Tax Evasion in Italy," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 64(2-3), pages 247-270, November.
- Sven Stö & Christian Traxler, 2005. "Tax Evasion and Auditing in a Federal Economy," International Tax and Public Finance, Springer, vol. 12(4), pages 515-531, August.
- Jonathan S. Feinstein, 1991. "An Econometric Analysis of Income Tax Evasion and its Detection," RAND Journal of Economics, The RAND Corporation, vol. 22(1), pages 14-35, Spring.
- Bruno S. Frey & Lars P. Feld, 2002. "Deterrence and Morale in Taxation: An Empirical Analysis," CESifo Working Paper Series 760, CESifo Group Munich.
- Traxler, Christian, 2012.
"Majority voting and the welfare implications of tax avoidance,"
Journal of Public Economics,
Elsevier, vol. 96(1), pages 1-9.
- Christian Traxler, 2009. "Majority Voting and the Welfare Implications of Tax Avoidance," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2009_22, Max Planck Institute for Research on Collective Goods.
- Loukas Balafoutas, 2011.
"How much income redistribution? An explanation based on vote-buying and corruption,"
Springer, vol. 146(1), pages 185-203, January.
- Loukas Balafoutas, 2009. "How much income redistribution? An explanation based on vote-buying and corruption," Working Papers 2009-29, Faculty of Economics and Statistics, University of Innsbruck.
- Bethencourt, Carlos & Kunze, Lars, 2013. "The political economics of redistribution, inequality and tax avoidance," MPRA Paper 51127, University Library of Munich, Germany.
- Besfamille, Martin & De Donder, Philippe & Lozachmeur, Jean-Marie, 2009. "The Political Economy of the (Weak) Enforcement of Sales Tax," CEPR Discussion Papers 7108, C.E.P.R. Discussion Papers.
- Rainald Borck, 2009.
"Voting on redistribution with tax evasion,"
Social Choice and Welfare,
Springer, vol. 32(3), pages 439-454, March.
- Weinreich, Daniel, 2013. "Fair tax evasion and majority voting over redistributive taxation," MPRA Paper 48919, University Library of Munich, Germany.
- Salvatore Barbaro & Jens Suedekum, 2009. "Voting on income tax exemptions," Public Choice, Springer, vol. 138(1), pages 239-253, January.
- Adam, Antonis & Kammas, Pantelis, 2012. "(Tax evasion) power to the people: does "early democratization" increase the size of the informal sector?," MPRA Paper 43343, University Library of Munich, Germany.
- Laszlo Goerke, 2012.
"The Optimal Structure of Commodity Taxation in a Monopoly with Tax Avoidance or Evasion,"
Public Finance Review,
, vol. 40(4), pages 519-536, July.
- Goerke, Laszlo, 2011. "The optimal structure of commodity taxation in a monopoly with tax avoidance or evasion," University of Tuebingen Working Papers in Economics and Finance 8, University of Tuebingen, Faculty of Economics and Social Sciences.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alexandra Frank).
If references are entirely missing, you can add them using this form.