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Do political incentives matter for tax policies? Ideology, opportunism and the tax structure

  • Angelopoulos, Konstantinos
  • Economides, George
  • Kammas, Pantelis

This paper investigates the importance of political ideology and opportunism in the choice of the tax structure. In particular, we examine the effects of cabinet ideology and elections on the distribution of the tax burden across factors of production and consumption for 21 OECD countries over the period 1970-2000 by employing four alternative cabinet ideology measures and by using the methodology of effective tax rates. There is evidence of both opportunistic and partisan effects on tax policies. More precisely, we find that left-wing governments rely more on capital relative to labor income taxation and that they tend to increase consumption taxes. Moreover, we find that income tax rates (but not consumption taxes) tend to be reduced in preelectoral periods and that capital effective tax rates (defined broadly to include taxes on selfemployed income) are reduced by more than effective labor tax rates.

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File URL: http://hdl.handle.net/10943/124
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Paper provided by Scottish Institute for Research in Economics (SIRE) in its series SIRE Discussion Papers with number 2009-09.

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Date of creation: 2009
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Handle: RePEc:edn:sirdps:124
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