The Politics of Progressive Income Taxation with Incentive Effects
This paper studies majority voting over non-linear income taxes when individuals respond to taxation by substituting untaxable leisure to taxable labor (incentive effects). We first show that voting cycle over progressive and regressive taxes is inevitable. This is because the middle-class can always lower its tax burden at the expense of the rich by imposing progressive taxes (convex tax function) while the rich and the poor can reduce their tax burden by imposing regressive taxes (concave tax function). We then investigate three solutions to this cycling problem: (i) reducing the policy space to the policies that are ideal for some voter; (ii) weakening the voting equilibrium concept; (iii) assuming parties also care about the size of their majority. The main results is that progressivity emerges as a voting equilibrium if there is a lack of polarization at the extremes of the income distribution. Interestingly the poor would prefer regressive taxes.
|Date of creation:||Jul 2000|
|Date of revision:|
|Contact details of provider:|| Postal: London E1 4NS|
Phone: +44 (0) 20 7882 5096
Fax: +44 (0) 20 8983 3580
Web page: http://www.econ.qmul.ac.uk
More information through EDIRC
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.:
- Philippe De Donder & Jean Hindriks, 1998.
"The political economy of targeting,"
Springer, vol. 95(1), pages 177-200, April.
- Richard Blundell & Alan Duncan & Costas Meghir, 1998.
"Estimating Labor Supply Responses Using Tax Reforms,"
Econometric Society, vol. 66(4), pages 827-862, July.
- Richard Blundell & Alan Duncan & Costas Meghir, 1995. "Estimating labour supply responses using tax reforms," IFS Working Papers W95/07, Institute for Fiscal Studies.
- Tim Besley & Stephen Coate, .
""An Economic Model of Representative Democracy'',"
CARESS Working Papres
95-02, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
- Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
- Stigler, George J, 1970. "Director's Law of Public Income Redistribution," Journal of Law and Economics, University of Chicago Press, vol. 13(1), pages 1-10, April.
- Philippe De Donder, 2000. "Majority voting solution concepts and redistributive taxation," Social Choice and Welfare, Springer, vol. 17(4), pages 601-627.
- Young, H Peyton, 1990. "Progressive Taxation and Equal Sacrifice," American Economic Review, American Economic Association, vol. 80(1), pages 253-66, March.
- De Donder, Philippe & Le Breton, Michel & Truchon, Michel, 1998. "Choosing from a Weighted Tournament," Cahiers de recherche 9815, Université Laval - Département d'économique.
- 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.
- Marhuenda, Francisco & Ortuno-Ortin, Ignacio, 1995. "Popular support for progressive taxation," Economics Letters, Elsevier, vol. 48(3-4), pages 319-324, June.
- Francisco Marhuenda & Ignacio Ortuño Ortín, 1995. "Popular Support For Progressive Taxation," Working Papers. Serie AD 1995-15, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- De Donder, Philippe & Le Breton, Michel & Truchon, Michel, 2000. "Choosing from a weighted tournament1," Mathematical Social Sciences, Elsevier, vol. 40(1), pages 85-109, July.
- John Roemer, 2003.
"The Democratic Political Economy Of Progressive Income Taxation,"
9711, University of California, Davis, Department of Economics.
- John E. Roemer, 1999. "The Democratic Political Economy of Progressive Income Taxation," Econometrica, Econometric Society, vol. 67(1), pages 1-20, January.
- John E. Roemer, . "The Democratic Political Economy Of Progressive Income Taxation," Department of Economics 97-11, California Davis - Department of Economics.
- John E. Roemer, 1997. "The Democratic Political Economy of Progressive Income Taxation," Discussion Papers 97-03, University of Copenhagen. Department of Economics.
- Kramer, Gerald H. & Snyder, James M., 1983.
"Fairness, Self-Interest, and the Politics of the Progressive Income Tax,"
498, California Institute of Technology, Division of the Humanities and Social Sciences.
- 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.
- Gerald Kramer, 1983. "Is there a demand for progressivity?," Public Choice, Springer, vol. 41(1), pages 223-228, January.
- 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.
- Kramer, Gerald H., 1977. "A dynamical model of political equilibrium," Journal of Economic Theory, Elsevier, vol. 16(2), pages 310-334, December.
- David Epstein, 1997. "Uncovering some subtleties of the uncovered set: Social choice theory and distributive politics," Social Choice and Welfare, Springer, vol. 15(1), pages 81-93.
- Laslier, Jean-Francois & Trannoy, Alain & Van Der Straeten, Karine, 2003.
"Voting under ignorance of job skills of unemployed: the overtaxation bias,"
Journal of Public Economics,
Elsevier, vol. 87(3-4), pages 595-626, March.
- J-F. Laslier & A. Trannoy & K. Van Der Straeten, 2000. "Voting Under Ignorance of Job Skills of Unemployed : The Overtaxation bias," THEMA Working Papers 2000-38, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
- Jean-FranÚois Laslier, 2000. "Interpretation of electoral mixed strategies," Social Choice and Welfare, Springer, vol. 17(2), pages 283-292.
- Gans, Joshua S. & Smart, Michael, 1996. "Majority voting with single-crossing preferences," Journal of Public Economics, Elsevier, vol. 59(2), pages 219-237, February.
- Martin J. Osborne & Al Slivinski, 1996.
"A Model of Political Competition with Citizen-Candidates,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 111(1), pages 65-96.
- Martin J. Osborne & Al Slivinksi, 1995. "A Model of Political Competition with Citizen-Candidates," Department of Economics Working Papers 1995-01, McMaster University.
- Laffond G. & Laslier J. F. & Le Breton M., 1993. "The Bipartisan Set of a Tournament Game," Games and Economic Behavior, Elsevier, vol. 5(1), pages 182-201, January.
- Mitra, Tapan & Ok, Efe A. & Kockesen, Levent, 1998. "Popular support for progressive taxation and the relative income hypothesis," Economics Letters, Elsevier, vol. 58(1), pages 69-76, January.
- Hettich, Walter & Winer, Stanley L, 1988. "Economic and Political Foundations of Tax Structure," American Economic Review, American Economic Association, vol. 78(4), pages 701-12, September.
When requesting a correction, please mention this item's handle: RePEc:qmw:qmwecw:wp416. 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: (Nick Vriend)
If references are entirely missing, you can add them using this form.