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On the Political Economy of Income Taxation

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  • Berliant, Marcus
  • Gouveia, Miguel

Abstract

The literatures dealing with voting, optimal income taxation, and implementation are integrated here to address the problem of voting over income taxes. In contrast with previous articles, general nonlinear income taxes that affect the labor-leisure decisions of consumers who work and vote are allowed. Uncertainty plays an important role in that the government does not know the true realizations of the abilities of consumers drawn from a known distribution, but must meet the realization-dependent budget. Even though the space of alternatives is infinite dimensional, conditions on tax requirements such that a majority rule equilibrium exists are found. Finally, conditions are found to assure existence of a majority rule equilibrium when agents vote over both a public good and income taxes to finance it.

Suggested Citation

  • Berliant, Marcus & Gouveia, Miguel, 2018. "On the Political Economy of Income Taxation," MPRA Paper 84437, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:84437
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    References listed on IDEAS

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    Cited by:

    1. Berliant, M. & Gouveia, M., 1990. "Incentive Compatible Income Taxation, Individual Revenue Requirements And Welfare," RCER Working Papers 234, University of Rochester - Center for Economic Research (RCER).
    2. Philippe De Donder & Jean Hindriks, 2004. "Majority Support for Progressive Income Taxation with Corner Preferences," Public Choice, Springer, vol. 118(3_4), pages 437-449, March.
    3. Carbonell-Nicolau Oriol, 2009. "A Positive Theory of Income Taxation," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-49, July.
    4. Marcus Berliant & Pierre C. Boyer, 2022. "Politics and Income Taxes: Progress and Progressivity," CESifo Working Paper Series 10041, CESifo.
    5. George Warskett & Stanley Winer & Walter Hettich, 1998. "The Complexity of Tax Structure in Competitive Political Systems," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 5(2), pages 123-151, May.

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    More about this item

    Keywords

    Voting; Income taxation; Public good;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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