Advanced Search
MyIDEAS: Login

The Uneasy Case for the Flat Tax

Contents:

Author Info

  • Francis Buckley

    (George Mason Law School)

  • Eric Rasmusen

    (Indiana University, Kelley School of Business)

Abstract

There is a secret paradox at the heart of social contract theories. Such theories assume that, because personal security and private property are at risk in a state of nature, subjects will agree to grant Leviathan a monopoly of violence. But what is to prevent Leviathan from turning on his subjects once they have lain down their arms? If Leviathan has the same incentives as his subjects in the Hobbesian state of nature, he will plunder them more thoroughly than ever they plundered themselves in the state of nature. Thus the social contract always leaves subjects worse off, unless Leviathan can fetter himself. And how can Leviathan bind himself, if he can always impose confiscatory taxes or choke off trade through inefficient regulations? This Article suggests that schemes of progressive taxation, in which marginal tax rates increase with taxable income, may be seen as a useful incentive strategy to bribe Leviathan from imposing inefficient regulations. Income taxes give Leviathan an equity claim in his state's economy, and progressive taxes give him a greater residual interest in upside payoffs. Leviathan will then demand a higher side payment from interest groups to impose value- destroying regulations. Of course, progressive taxation imposes its own incentive costs, by reducing the subject's private gains. However, these costs must be balanced against the gains from correcting Leviathan's misincentives, and it may that such gains exceed the costs of progressive taxation.

Download Info

If 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.
File URL: http://128.118.178.162/eps/pe/papers/9907/9907003.pdf
Download Restriction: no

Bibliographic Info

Paper provided by EconWPA in its series Public Economics with number 9907003.

as in new window
Length:
Date of creation: 13 Jul 1999
Date of revision:
Handle: RePEc:wpa:wuwppe:9907003

Note: Type of Document - Pdf; prepared on IBM PC ; to print on ;
Contact details of provider:
Web page: http://128.118.178.162

Related research

Keywords: flat tax; Hobbes; political economy; Leviathan; regulation; mandates; constitutions; progressive taxation;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
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.:
as in new window
  1. Kreps, David M. & Milgrom, Paul & Roberts, John & Wilson, Robert, 1982. "Rational cooperation in the finitely repeated prisoners' dilemma," Journal of Economic Theory, Elsevier, vol. 27(2), pages 245-252, August.
  2. Pechman, Joseph A, 1990. "The Future of the Income Tax," American Economic Review, American Economic Association, vol. 80(1), pages 1-20, March.
  3. Easterly, William, 1999. "When is fiscal adjustment an illusion?," Policy Research Working Paper Series 2109, The World Bank.
  4. Brickley, James A. & Bhagat, Sanjai & Lease, Ronald C., 1985. "The impact of long-range managerial compensation plans on shareholder wealth," Journal of Accounting and Economics, Elsevier, vol. 7(1-3), pages 115-129, April.
  5. Richard A. Posner, 1971. "Taxation by Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 22-50, Spring.
  6. Becker, Gary S., 1985. "Public policies, pressure groups, and dead weight costs," Journal of Public Economics, Elsevier, vol. 28(3), pages 329-347, December.
  7. Veitch, John M., 1986. "Repudiations and Confiscations by the Medieval State," The Journal of Economic History, Cambridge University Press, vol. 46(01), pages 31-36, March.
  8. John E. Roemer, . "The Democratic Political Economy Of Progressive Income Taxation," Department of Economics 97-11, California Davis - Department of Economics.
  9. Weiss, Lawrence A. & Wruck, Karen H., 1998. "Information problems, conflicts of interest, and asset stripping:: Chapter 1's failure in the case of Eastern Airlines1," Journal of Financial Economics, Elsevier, vol. 48(1), pages 55-97, April.
  10. Robert Townsend, 1979. "Optimal contracts and competitive markets with costly state verification," Staff Report 45, Federal Reserve Bank of Minneapolis.
  11. Young, H Peyton, 1990. "Progressive Taxation and Equal Sacrifice," American Economic Review, American Economic Association, vol. 80(1), pages 253-66, March.
  12. Gary S. Becker, 1974. "A Theory of Social Interactions," NBER Working Papers 0042, National Bureau of Economic Research, Inc.
  13. Brennan,Geoffrey & Buchanan,James M., 1980. "The Power to Tax," Cambridge Books, Cambridge University Press, number 9780521233293, December.
  14. Slemrod, Joel, 1990. "Optimal Taxation and Optimal Tax Systems," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 157-78, Winter.
  15. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-41, August.
  16. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
  17. Gary S. Becker & Casey B. Mulligan, 1998. "Deadweight Costs and the Size of Government," University of Chicago - George G. Stigler Center for Study of Economy and State 144, Chicago - Center for Study of Economy and State.
  18. James B. Davies, 1992. "Tax Incidence: Annual and Lifetime Perspectives in the United States and Canada," NBER Chapters, in: Canada-U.S. Tax Comparisons, pages 151-188 National Bureau of Economic Research, Inc.
  19. Rasmusen, Eric B & Zupan, Mark A, 1991. " Extending the Economic Theory of Regulation to the Form of Policy," Public Choice, Springer, vol. 72(2-3), pages 167-91, December.
  20. Kaplow, Louis & Shavell, Steven, 1994. "Why the Legal System Is Less Efficient Than the Income Tax in Redistributing Income," The Journal of Legal Studies, University of Chicago Press, vol. 23(2), pages 667-81, June.
  21. Rasmusen, Eric, 1992. "An Income-Satiation Model of Efficiency Wages," Economic Inquiry, Western Economic Association International, vol. 30(3), pages 467-78, July.
  22. MaCurdy, Thomas, 1992. "Work Disincentive Effects of Taxes: A Reexamination of Some Evidence," American Economic Review, American Economic Association, vol. 82(2), pages 243-49, May.
  23. Gordon Tullock, 1975. "The Transitional Gains Trap," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 671-678, Autumn.
  24. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, 1998. "The Quality of Goverment," NBER Working Papers 6727, National Bureau of Economic Research, Inc.
  25. Kramer, Gerald H. & Snyder, James M., 1983. "Fairness, Self-Interest, and the Politics of the Progressive Income Tax," Working Papers 498, California Institute of Technology, Division of the Humanities and Social Sciences.
  26. Posner, Richard A, 1975. "The Social Costs of Monopoly and Regulation," Journal of Political Economy, University of Chicago Press, vol. 83(4), pages 807-27, August.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wpa:wuwppe:9907003. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.