IDEAS home Printed from https://ideas.repec.org/a/kap/pubcho/v58y1988i3p237-245.html
   My bibliography  Save this article

Controlling leviathan through tax reduction

Author

Listed:
  • Michael Marlow
  • William Orzechowski

Abstract

Our paper seeks the strategy that allows the greatest ability to reduce public sector size within a political environment that does not want us to directly set limits on public sector size. Tax reduction, through its quid pro quo effect, offers high tangibility to taxpayers and may raise political power of groups that seek both tax reduction and greater opposition to lobbies that seek spending increases for their narrowly-defined interests. Moreover, as Manage and Marlow (1986) argues, since the political response to balanced budget rules is likely to raise taxes, this political bias of tax hikes suggests that balanced budget rules are offered as a means of changing the funding mix and not the actual budget constraint of government. Our analysis should not be construed as a statement promoting deficit finance. Preferred policy is one that forces tax reduction, a balanced budget and price stability. However, this is ‘optimal’ only in a world without political constraints and special interests seeking public funds. Hard second-best choices, based on available analytical and empirical evidence, suggest that tax reduction controls the most important element of the budget constraint and that we should not rely solely on balanced budget rules to solve the underlying public sector growth problem. Copyright Kluwer Academic Publishers 1988

Suggested Citation

  • Michael Marlow & William Orzechowski, 1988. "Controlling leviathan through tax reduction," Public Choice, Springer, vol. 58(3), pages 237-245, September.
  • Handle: RePEc:kap:pubcho:v:58:y:1988:i:3:p:237-245
    DOI: 10.1007/BF00155669
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/BF00155669
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1007/BF00155669?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Evans, Paul, 1985. "Do Large Deficits Produce High Interest Rates?," American Economic Review, American Economic Association, vol. 75(1), pages 68-87, March.
    2. Michael Marlow, 1988. "Fiscal decentralization and government size," Public Choice, Springer, vol. 56(3), pages 259-269, March.
    3. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    4. Michael Marlow, 1986. "Private sector shrinkage and the growth of industrialized economies," Public Choice, Springer, vol. 49(2), pages 143-154, January.
    5. von Furstenberg, George M & Green, R Jeffrey & Jeong, Jin-Ho, 1986. "Tax and Spend, or Spend and Tax?," The Review of Economics and Statistics, MIT Press, vol. 68(2), pages 179-188, May.
    6. Friedman, Milton, 1971. "Government Revenue from Inflation," Journal of Political Economy, University of Chicago Press, vol. 79(4), pages 846-856, July-Aug..
    7. Buchanan, James M, 1976. "Barro on the Ricardian Equivalence Theorem," Journal of Political Economy, University of Chicago Press, vol. 84(2), pages 337-342, April.
    8. Gordon Tullock, 1975. "The Transitional Gains Trap," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 671-678, Autumn.
    9. Paul R. Blackley, 1986. "Causality Between Revenues and Expenditures and the Size of the Federal Budget," Public Finance Review, , vol. 14(2), pages 139-156, April.
    10. Michael Marlow & Neela Manage, 1987. "Expenditures and receipts: Testing for causality in state and local government finances," Public Choice, Springer, vol. 53(3), pages 243-255, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Michael Marlow & David Joulfaian, 1989. "The determinants of off-budget activity of state and local governments," Public Choice, Springer, vol. 63(2), pages 113-123, November.
    2. Michael Marlow & William Orzechowski, 1997. "The Separation of Spending from Taxation: Implications for Collective Choices," Constitutional Political Economy, Springer, vol. 8(2), pages 151-163, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. M. Haider Hussain, 2004. "On the Causal Relationship between Government Expenditure and Tax Revenue in Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 9(2), pages 105-117, Jul-Dec.
    2. Mohsen Mehrara & Abbas Ali Rezaei, 2014. "The Relationship between Government Revenue and Government Expenditure in Iran," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(3), pages 171-182, March.
    3. M. Haider Hussain, 2005. "On the Causal Relationship between Government Expenditure and Tax Revenue in Pakistan," Macroeconomics 0509014, University Library of Munich, Germany.
    4. Elmendorf, Douglas W. & Gregory Mankiw, N., 1999. "Government debt," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 25, pages 1615-1669, Elsevier.
    5. Westerlund, Joakim & Mahdavi, Saeid & Firoozi, Fathali, 2011. "The tax-spending nexus: Evidence from a panel of US state-local governments," Economic Modelling, Elsevier, vol. 28(3), pages 885-890, May.
    6. Ekkehart Schlicht, 2013. "Unexpected Consequences of Ricardian Expectations," Metroeconomica, Wiley Blackwell, vol. 64(3), pages 498-512, July.
    7. Francisco de Castro & José M. González-Páramo & Pablo Hernández de Cos, 2001. "Evaluating the dynamics of fiscal policy in Spain: patterns of interdependence and consistency of public expenditure and revenues," Working Papers 0103, Banco de España.
    8. Yaya Keho, 2010. "Spending Cuts or Tax Adjustments: How Can UEMOA Countries Control Their Budget Deficits?," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 9(3), pages 233-252, December.
    9. James Payne, 1997. "The tax-spend debate: the case of Canada," Applied Economics Letters, Taylor & Francis Journals, vol. 4(6), pages 381-386.
    10. Smetters, Kent, 1999. "Ricardian equivalence: long-run Leviathan," Journal of Public Economics, Elsevier, vol. 73(3), pages 395-421, September.
    11. Nithin K, 2015. "The Case of Revenue versus Expenditure Optimization in India," Working Papers 1528, Indian Institute of Foreign Trade.
    12. Visser, H., 1990. "Crowding out and the government budget," Serie Research Memoranda 0006, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    13. Narayan, Paresh Kumar, 2005. "The government revenue and government expenditure nexus: empirical evidence from nine Asian countries," Journal of Asian Economics, Elsevier, vol. 15(6), pages 1203-1216, January.
    14. António Afonso, 2007. "An Avenue for Expansionary Fiscal Contractions," The IUP Journal of Public Finance, IUP Publications, vol. 0(3), pages 7-15, August.
    15. A. Phiri, 2019. "Asymmetries in the revenue–expenditure nexus: new evidence from South Africa," Empirical Economics, Springer, vol. 56(5), pages 1515-1547, May.
    16. Ardagna Silvia & Caselli Francesco & Lane Timothy, 2007. "Fiscal Discipline and the Cost of Public Debt Service: Some Estimates for OECD Countries," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-35, August.
    17. Carlos Vieira, 2004. "The Deficit?Interest Rate Connection: an empirical assessment of the EU," Economics Working Papers 5_2004, University of Évora, Department of Economics (Portugal).
    18. HARJIT K. Arora & PAMI Dua, 1993. "Budget Deficits, Domestic Investment, And Trade Deficits," Contemporary Economic Policy, Western Economic Association International, vol. 11(1), pages 29-44, January.
    19. repec:hal:spmain:info:hdl:2441/5221 is not listed on IDEAS
    20. Ahmad Zubaidi Baharumshah & Evan Lau, 2005. "Budget and Current Account Deficits in SEACEN Countries: Evidence Based on the Panel Approach," International Finance 0504002, University Library of Munich, Germany.
    21. David Alan Aschauer, 1990. "Is Government Spending Stimulative?," Contemporary Economic Policy, Western Economic Association International, vol. 8(4), pages 30-46, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:pubcho:v:58:y:1988:i:3:p:237-245. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.