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Representative democracy and marginal rate progressive income taxation

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  • Carbonell-Nicolau, Oriol
  • Klor, Esteban F.

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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  • 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.
    • Handle: RePEc:eee:pubeco:v:87:y:2003:i:5-6:p:1137-1164
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    17. 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.
    18. 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.
    19. Sen, Amartya, 1973. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198281931.
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    Citations

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    Cited by:

    1. Dhammika Dharmapala & Etienne Lehmann, 2003. "A Median Voter Theorem for Postelection Politics," Working papers 2003-47, University of Connecticut, Department of Economics.
    2. 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.
    3. Jenny de Freitas, 2009. "A probabilistic voting model of progressive taxation with incentive effects," Hacienda Pública Española / Review of Public Economics, IEF, vol. 190(3), pages 9-26, September.
    4. Rafael Salas & Juan Rodríguez, 2013. "Popular support for social evaluation functions," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 40(4), pages 985-1014, April.
    5. Zsofia Barany, 2011. "Income inequality and the progressivity of taxes in a coalition formation model," SciencePo Working papers Main hal-00972940, HAL.
    6. 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.
    7. Carbonell-Nicolau, Oriol & Llavador, Humberto, 2018. "Inequality reducing properties of progressive income tax schedules: the case of endogenous income," Theoretical Economics, Econometric Society, vol. 13(1), January.
    8. Carbonell-Nicolau, Oriol & Ok, Efe A., 2007. "Voting over income taxation," Journal of Economic Theory, Elsevier, vol. 134(1), pages 249-286, May.
    9. Zsofia Barany, 2011. "Income inequality and the progressivity of taxes in a coalition formation model," SciencePo Working papers hal-00972940, HAL.
    10. repec:spo:wpecon:info:hdl:2441/eu4vqp9ompqllr09i8hj22lpn is not listed on IDEAS
    11. repec:hal:spmain:info:hdl:2441/eu4vqp9ompqllr09i8hj22lpn is not listed on IDEAS
    12. Oriol Carbonell-Nicolau & Efe Ok, 2004. "Multidimensional income taxation and electoral competition: an equilibrium analysis," Departmental Working Papers 200407, Rutgers University, Department of Economics.
    13. Rafael Salas & Juan Gabriel Rodríguez, 2010. "Popular support for egalitarian social welfare," Working Papers 171, ECINEQ, Society for the Study of Economic Inequality.
    14. repec:spo:wpmain:info:hdl:2441/eu4vqp9ompqllr09i8hj22lpn is not listed on IDEAS
    15. repec:hal:wpspec:info:hdl:2441/eu4vqp9ompqllr09i8hj22lpn is not listed on IDEAS
    16. Daniel R. Carroll, 2013. "The demand for income tax progressivity in the growth model," Working Papers (Old Series) 1106, Federal Reserve Bank of Cleveland.
    17. M Socorro Puy, 2019. "Incentives for progressive income taxation," Journal of Theoretical Politics, , vol. 31(1), pages 66-102, January.

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    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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