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Representative Democracy and Marginal Rate Progressive Income Taxation

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Author Info
Carbonell, O.
Klor, E.
Abstract

This paper develops a political economy model that is consistent with the fact that democracies have a preference for increasing marginal tax rates on income. We present a model in which there is an exogenous set of political parties with preferences over the set of admissible tax schedules. This set contains virtually any increasing and piecewise linear continuous function. Each party decides whether or not to present a candidate for election. There is a fixed cost of running. The elected candidate implements one of her preferred tax policies. Our main results provide conditions under which a Strong Nash Equilibrium exists, and a tax schedule with increasing marginal tax rates is implemented in some Nash Equilibria and in any Strong Nash Equilibrium.

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Paper provided by C.V. Starr Center for Applied Economics, New York University in its series Working Papers with number 00-12.

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Length: 30 pages
Date of creation: 2000
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Handle: RePEc:cvs:starer:00-12

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Postal: C.V. Starr Center, Department of Economics, New York University, 19 W. 4th Street, 6th Floor, New York, NY 10012
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Related research
Keywords: REPRESENTATIVE DEMOCRACY; MARGINAL RATE PROGRESSIVE INCOME TAXATION.;

Find related papers by JEL classification:
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior

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. [Downloadable!] (restricted)
  2. 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. [Downloadable!] (restricted)
  3. 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. [Downloadable!] (restricted)
  4. John E. Roemer, 1999. "The Democratic Political Economy of Progressive Income Taxation," Econometrica, Econometric Society, vol. 67(1), pages 1-20, January.
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  5. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December. [Downloadable!] (restricted)
  6. Osborne, Martin J & Slivinski, Al, 1996. "A Model of Political Competition with Citizen-Candidates," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 65-96, February. [Downloadable!] (restricted)
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  7. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October. [Downloadable!] (restricted)
  8. Dasgupta, Partha & Sen, Amartya & Starrett, David, 1973. "Notes on the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 6(2), pages 180-187, April. [Downloadable!] (restricted)
  9. Thurow, Lester C, 1971. "The Income Distribution as a Pure Public Good," The Quarterly Journal of Economics, MIT Press, vol. 85(2), pages 327-36, May. [Downloadable!] (restricted)
  10. Hamada, Koichi, 1973. "A simple majority rule on the distribution of income," Journal of Economic Theory, Elsevier, vol. 6(3), pages 243-264, June. [Downloadable!] (restricted)
  11. Marhuenda, Francisco & Ortuno-Ortin, Ignacio, 1998. "Income taxation, uncertainty and stability," Journal of Public Economics, Elsevier, vol. 67(2), pages 285-300, February. [Downloadable!] (restricted)
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  12. Besley, Timothy & Coate, Stephen, 1997. "An Economic Model of Representative Democracy," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 85-114, February.
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  13. 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. [Downloadable!] (restricted)
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