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Abstract

We analyze the problem of choosing the most appropriate method for apportioning taxes in a democracy. We consider a simple model of taxation and restrict our attention to piece-wise linear tax methods, which are almost ubiquitous in advanced democracies worldwide. In spite of facing an impossibility result saying that if we allow agents to vote for any piece-wise linear tax method no equilibrium exists, we show that if we limit the domain of admissible methods in a meaningful way, albeit not restrictive, an equilibrium does exist. We also show that, for such a domain, a wide variety of methods can be supported in equilibrium. This last result provides rationale for some activities of special interest groups.

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Bibliographic Info

Paper provided by Universidad Pablo de Olavide, Department of Economics in its series Working Papers with number 10.02.

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Length: 21 pages
Date of creation: Jan 2010
Date of revision:
Handle: RePEc:pab:wpaper:10.02

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Related research

Keywords: voting; taxes; majority; single crossing; special interest politics.;

Other versions of this item:

Find related papers by JEL classification:

• D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
• H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

This paper has been announced in the following NEP Reports:

• NEP-ALL-2010-01-30 (All new papers)
• NEP-CDM-2010-01-30 (Collective Decision-Making)
• NEP-POL-2010-01-30 (Positive Political Economics)
• NEP-PUB-2010-01-30 (Public Finance)

References

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