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The Humean Critique of Lump Sum Taxation (or the Implausibility of Pure Lump Sum Taxes in Autocracy)

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  • Henry Tam

Abstract

This paper revives Hume's idea that it is unlikely for sovereign governments to implement pure lump-sum taxation because lump-sum taxes are arbitrary. We phrase the problem as one of time-inconsistency of tax collection for a tax revenue maximizing Leviathan government. We demonstrate that while lump-sum taxation is more efficient than distortionary income tax in terms of the ex ante amount of tax revenue raised, honoring a lump-sum tax is less likely to be credible than honoring a distortionary income tax. We also extend the framework to understanding the relationship between expropriation risk and the lack of foreign direct investment.

Suggested Citation

  • Henry Tam, 2004. "The Humean Critique of Lump Sum Taxation (or the Implausibility of Pure Lump Sum Taxes in Autocracy)," Public Choice, Springer, vol. 118(1_2), pages 61-76, January.
    • Handle: RePEc:kap:pubcho:v:118:y:2004:i:1_2:p:61-76
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    Cited by:

    1. Carmona, Miguel, 2010. "The regulatory function in public-private partnerships for the provision of transport infrastructure," Research in Transportation Economics, Elsevier, vol. 30(1), pages 110-125.
    2. Mykhailo Sverdan, 2022. "Lump-Sum Tax Is An Alternative To Wealth Taxation," Three Seas Economic Journal, Publishing house "Baltija Publishing", vol. 3(4).

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