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A Contribution to the Positive Theory of Direct Taxation

  • Emanuele, Canegrati

In this paper I analyse a probabilistic voting model where political candidates choose a direct taxation policy to maximise the probability of winning elections. Society is divided into groups which have di¤erent preferences for consumption of leisure or, in other words, are di¤erently single-minded on the amount of leisure. The use of a probabilistic voting model characterized by the presence of single-minded groups breaks down the classic results obtained by using the median voter theorem, because it is no longer only the level of income which drives the equilibrium policies but also the ability of groups to focus on leisure. The robustness of these results is also demonstrated in the presence of heterogeneity in the labour income. Finally, using data from the Luxemburg Income Study, I demon- strate that the cohort-speci�c inequality is signi�cantly a¤ected by the structure of the taxation system and that policies chosen by politicians do not seem to be originated by the goal of equality.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 6117.

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Date of creation: 05 Dec 2007
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Handle: RePEc:pra:mprapa:6117
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  1. Klaus Beckmann & Elisabeth Lackner-Frey, 2002. "How Leviathan Taxes," Constitutional Political Economy, Springer, vol. 13(3), pages 265-273, September.
  2. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
  3. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
  4. canegrati, emanuele, 2006. "The Single-Mindedness Theory: Micro-foundation and Applications to Social Security Systems," MPRA Paper 1223, University Library of Munich, Germany.
  5. Assar Lindbeck & Jörgen Weibull, 1987. "Balanced-budget redistribution as the outcome of political competition," Public Choice, Springer, vol. 52(3), pages 273-297, January.
  6. Guy Laroque, 2004. "Indirect Taxation is Superfluous under Separability and Taste Homogeneity : A Simple Proof," Working Papers 2004-23, Centre de Recherche en Economie et Statistique.
  7. Lindert, Peter H., 2000. "Three centuries of inequality in Britain and America," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 3, pages 167-216 Elsevier.
  8. Alan J. Auerbach, 1982. "The Theory of Excess Burden and Optimal Taxation," NBER Working Papers 1025, National Bureau of Economic Research, Inc.
  9. repec:cup:cbooks:9780521622912 is not listed on IDEAS
  10. Gerald Kramer, 1983. "Is there a demand for progressivity?," Public Choice, Springer, vol. 41(1), pages 223-228, January.
  11. Cowell, F.A., 2000. "Measurement of inequality," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 2, pages 87-166 Elsevier.
  12. Gahvari, Firouz, 2006. "On the marginal cost of public funds and the optimal provision of public goods," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1251-1262, August.
  13. Michael Keen, 2007. "VAT attacks!," International Tax and Public Finance, Springer, vol. 14(4), pages 365-381, August.
  14. Casey B. Mulligan & Xavier Sala-i-Martin, 2003. "Social Security, Retirement, and the Single-Mindedness of the Electorate," NBER Working Papers 9691, National Bureau of Economic Research, Inc.
  15. Lindbeck, Assar & Weibull, Jorgen W., 1993. "A model of political equilibrium in a representative democracy," Journal of Public Economics, Elsevier, vol. 51(2), pages 195-209, June.
  16. Michele Polo, . "Electoral competition and political rents," Working Papers 144, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  17. Gans, Joshua S. & Smart, Michael, 1996. "Majority voting with single-crossing preferences," Journal of Public Economics, Elsevier, vol. 59(2), pages 219-237, February.
  18. Emmanuel Saez, 2000. "The Desirability of Commodity Taxation under Non-Linear Income Taxation and Heterogeneous Tastes," NBER Working Papers 8029, National Bureau of Economic Research, Inc.
  19. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
  20. Kaplow, Louis, 2006. "On the undesirability of commodity taxation even when income taxation is not optimal," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1235-1250, August.
  21. Diamond, P. A., 1975. "A many-person Ramsey tax rule," Journal of Public Economics, Elsevier, vol. 4(4), pages 335-342, November.
  22. repec:cup:cbooks:9780521021807 is not listed on IDEAS
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