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Income taxation, uncertaintly and stability

Author

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  • Francisco Marhuenda Hurtado

    (Universidad Carlos III de Madrid)

  • Ignacio Ortuño Ortín

    (Universidad de Alicante)

Abstract

This paper develops a political model to analyze the stability of income tax schedules. It isassumed that agents perceive any proposed alternative tax policy as more uncertain than thestatus quo. A tax policy is stable if it is a Condorcet winner. It is well known that in a modelwithout uncertainty the existence of such a policy is very rare. We show, however, that in realcases this might not be a serious problem since small amounts of uncertainty can bring stabilityto the status quo. It is also shown that linear tax functions can only be stable in economies withvery egalitarian income distributions and high taxation levels.

Suggested Citation

  • Francisco Marhuenda Hurtado & Ignacio Ortuño Ortín, 1997. "Income taxation, uncertaintly and stability," Working Papers. Serie AD 1997-07, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  • Handle: RePEc:ivi:wpasad:1997-07
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    References listed on IDEAS

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    1. Marhuenda, Francisco & Ortuno-Ortin, Ignacio, 1995. "Popular support for progressive taxation," Economics Letters, Elsevier, vol. 48(3-4), pages 319-324, June.
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    4. Bucovetsky, Sam, 1991. "Choosing tax rates and public expenditure levels using majority rule," Journal of Public Economics, Elsevier, vol. 46(1), pages 113-131, October.
    5. Snyder, James M. & Kramer, Gerald H., 1988. "Fairness, self-interest, and the politics of the progressive income tax," Journal of Public Economics, Elsevier, vol. 36(2), pages 197-230, July.
    6. Romer, Thomas, 1975. "Individual welfare, majority voting, and the properties of a linear income tax," Journal of Public Economics, Elsevier, vol. 4(2), pages 163-185, February.
    7. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
    8. Musgrave, Richard A, 1987. "Short of Euphoria," Journal of Economic Perspectives, American Economic Association, vol. 1(1), pages 59-71, Summer.
    9. Hinich, Melvin J. & Ledyard, John O. & Ordeshook, Peter C., 1972. "Nonvoting and the existence of equilibrium under majority rule," Journal of Economic Theory, Elsevier, vol. 4(2), pages 144-153, April.
    10. Romer, T., 1977. "Majority voting on tax parameters : Some further results," Journal of Public Economics, Elsevier, vol. 7(1), pages 127-133, February.
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    Citations

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    Cited by:

    1. Carbonell-Nicolau, Oriol & Klor, Esteban F., 2003. "Representative democracy and marginal rate progressive income taxation," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 2339-2366, September.
    2. Moreno-Ternero, Juan D., 2011. "Voting over piece-wise linear tax methods," Journal of Mathematical Economics, Elsevier, vol. 47(1), pages 29-36, January.
    3. Carbonell-Nicolau, Oriol & Ok, Efe A., 2007. "Voting over income taxation," Journal of Economic Theory, Elsevier, vol. 134(1), pages 249-286, May.
    4. 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.
    5. Carbonell-Nicolau, Oriol & Klor, Esteban F., 2003. "Representative democracy and marginal rate progressive income taxation," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 1137-1164, May.
    6. John Roemer, 2012. "The political economy of income taxation under asymmetric information: the two-type case," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 3(1), pages 181-199, March.
    7. Oriol Carbonell-Nicolau & Efe Ok, 2004. "Multidimensional income taxation and electoral competition: an equilibrium analysis," Departmental Working Papers 200407, Rutgers University, Department of Economics.

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    Keywords

    Majority voting; income taxation; uncertainty;

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