Tax avoidance and the political appeal of progressivity
Different theories have attempted to explain why contemporary societies have adopted marginal-rate progressive taxation schemes. One possible way of justifying this fact is to interpret the choice of a taxation scheme as the outcome of a political game between two office-seeking Downsian political parties. One can think that in such a game the existence of a majority of relatively poor voters will be enough to justify this choice. However, recent results show that at equilibrium self-interested voters do not always choose marginal-rate progressive taxation schemes in this game. We provide a refinement of the basic theory by introducing tax avoidance and showing how it affects the equilibrium outcome of the political game. We first characterize the set of mixed-strategy equilibria of the game in the case of quadratic taxation schemes, showing that tax avoidance enhances the election of marginal-rate progressive tax schemes. Second, we analyse a ``wiggling" taxes' case proving that tax avoidance leads, when ``efficient" enough, to the election of progressive taxation schemes with probability one.
|Date of creation:||2007|
|Date of revision:|
|Note:||View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00243060|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
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.:
- Brian Roberson, 2006. "The Colonel Blotto game," Economic Theory, Springer, vol. 29(1), pages 1-24, September.
- Jean Hindriks, 2000.
"Is There a Demand for Income Tax Progressivity?,"
415, Queen Mary University of London, School of Economics and Finance.
- Carbonell-Nicolau, Oriol & Ok, Efe A., 2007. "Voting over income taxation," Journal of Economic Theory, Elsevier, vol. 134(1), pages 249-286, May.
- Banks, Jeffrey S. & Duggan, John & Le Breton, Michel, 2002.
"Bounds for Mixed Strategy Equilibria and the Spatial Model of Elections,"
Journal of Economic Theory,
Elsevier, vol. 103(1), pages 88-105, March.
- Jeffrey S. Banks & John Duggan & Michel LeBreton, . "Bounds for Mixed Strategy Equilibria and the Spatial Model of Elections," Wallis Working Papers WP14, University of Rochester - Wallis Institute of Political Economy.
- Martin Feldstein, 1995.
"Tax Avoidance and the Deadweight Loss of the Income Tax,"
NBER Working Papers
5055, National Bureau of Economic Research, Inc.
- Martin Feldstein, 1999. "Tax Avoidance And The Deadweight Loss Of The Income Tax," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 674-680, November.
- Alessandro Lizzeri & Nicola Persico, .
""The Provision of Public Goods Under Alternative Electoral Incentives'',"
CARESS Working Papres
98-08, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
- Nicola Persico & Alessandro Lizzeri, 2001. "The Provision of Public Goods under Alternative Electoral Incentives," American Economic Review, American Economic Association, vol. 91(1), pages 225-239, March.
- Alessro Lizzeri & Nicola Persico, . "The Provision of Public Goods Under Alternative Electoral Incentives," Penn CARESS Working Papers b96440ba0bfa06ca550ac40aa, Penn Economics Department.
- Bernhardt, Dan & Duggan, John & Squintani, Francesco, 2007.
"Electoral competition with privately-informed candidates,"
Games and Economic Behavior,
Elsevier, vol. 58(1), pages 1-29, January.
- John Duggan, 2003. "Electoral Competition with Privately Informed Candidates," Theory workshop papers 505798000000000029, UCLA Department of Economics.
- Kvasov, Dmitriy, 2007. "Contests with limited resources," Journal of Economic Theory, Elsevier, vol. 136(1), pages 738-748, September.
- Marhuenda, Francisco & Ortuno-Ortin, Ignacio, 1995. "Popular support for progressive taxation," Economics Letters, Elsevier, vol. 48(3-4), pages 319-324, June.
- Laslier, Jean-Francois & Picard, Nathalie, 2002. "Distributive Politics and Electoral Competition," Journal of Economic Theory, Elsevier, vol. 103(1), pages 106-130, March.
When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-00243060. 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: (CCSD)
If references are entirely missing, you can add them using this form.