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On the Political Economics of Tax Reforms: survey and empirical assessment

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  • Micael Castanheira

    (ECARES, Université Libre de Bruxelles, Belgium)

  • Gaëtan Nicodème

    (European Commission, CESifo, CEPR and Université Libre de Bruxelles, Belgium)

  • Paola Profeta

    (Università Bocconi, Econpubblica and Dondena, Italy, CESifo)

Abstract

Political constraints and incentives are the true driver of tax reforms. This paper reviews the political economics literature on personal income tax systems and reforms to see how political mechanisms help explain tax reforms. We take some of the implications of these theories to the data using LABREF, a database that identifies labor tax reforms in the European Union for the period 2000-2007, and control for economic and labor market factors. We find that political variables carry more weight than economic variables, and we show empirical regularities that support political economy theories. We also find that governments tended to reform more in better economic times, engaging in pro-cyclical behavior.

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Bibliographic Info

Paper provided by Condorcet Center for political Economy in its series Economics Working Paper from Condorcet Center for political Economy at CREM-CNRS with number 2012-08-ccr.

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Date of creation: Mar 2012
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Handle: RePEc:tut:cccrwp:2012-08-ccr

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Keywords: political economy; taxation; personal income tax; LABREF;

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Citations

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Cited by:
  1. European Commission, 2012. "Tax reforms in EU Member States - Tax policy challenges for economic growth and fiscal sustainability – 2012 Report," Taxation Papers 34, Directorate General Taxation and Customs Union, European Commission.
  2. European Commission, 2010. "Tax Policy after the Crisis: Monitoring Tax Revenues and Tax Reforms in EU Member States 2010 Report," Taxation Papers 24, Directorate General Taxation and Customs Union, European Commission.
  3. Olivier Bargain & Mathias Dolls & Dirk Neumann & Andreas Peichl & Sebastian Siegloch, 2013. "Comparing Inequality Aversion across Countries When Labor Supply Responses Differ," AMSE Working Papers 1323, Aix-Marseille School of Economics, Marseille, France.
  4. Larisa Lubarova & Oleg Petrushin & Artur Radziwill, 2000. "Is Moldova Ready to Grow? Assessment of Post-crisis Policies (1999-2000)," CASE Network Studies and Analyses 0220, CASE-Center for Social and Economic Research.
  5. Andreas Bernecker, 2014. "Divided We Reform? Evidence from US Welfare Policies," CESifo Working Paper Series 4564, CESifo Group Munich.
  6. Micael Castanheira De Moura & Gaëtan Nicodème & Paola Profeta, 2012. "On the Political Economics of Tax Reforms: survey and empirical assessment," ULB Institutional Repository 2013/136798, ULB -- Universite Libre de Bruxelles.
  7. Lars P. Feld & Christoph A. Schaltegger, 2012. "Die Politische Ökonomik der Besteuerung," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 13(1-2), pages 116-136, 02.
  8. European Commission, 2011. "Tax Reforms in EU Member States 2011: tax policy challenges for economic growth and fiscal sustainability," Taxation Papers 28, Directorate General Taxation and Customs Union, European Commission.
  9. Doris Prammer, 2011. "Quality of taxation and the crisis: Tax shifts from a growth perspective," Taxation Papers 29, Directorate General Taxation and Customs Union, European Commission.
  10. Castanheira, Micael & Nicodème, Gaëtan & Profeta, Paola, 2011. "On the political economics of tax reforms," CEPR Discussion Papers 8507, C.E.P.R. Discussion Papers.

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