Voting Over Income Taxation

55 Pages Posted: 28 Mar 2006

See all articles by Oriol Carbonell-Nicolau

Oriol Carbonell-Nicolau

Rutgers University

Efe A. Ok

Leonard N. Stern School of Business - Department of Economics

Abstract

A major problem of the positive theory of income taxation is to explain why statutory income tax schedules in practice are marginal-rate progressive. While it is commonly believed that this is but a simple consequence of the fact that the number of relatively poor voters exceeds that of richer voters in general, putting this contention in a voting equilibrium context is not a trivial task. We do this here in the context of nonlinear taxation and attempt to provide a formal argument in support of this heuristic claim. We first establish the existence of mixed strategy equilibria and identify certain cases in which marginal-rate progressive taxes are chosen almost surely by the political parties. Unfortunately, we also find that if the tax policy space is not artificially constrained, the support of at least one equilibrium cannot be contained within the set of marginal-rate progressive taxes.

Keywords: progressive taxation, electoral competition, discontinuous games, mixed strategy equilibrium

JEL Classification: H23, H31, D72, D78

Suggested Citation

Carbonell-Nicolau, Oriol and Ok, Efe A., Voting Over Income Taxation. Journal of Economic Theory, Forthcoming, Available at SSRN: https://ssrn.com/abstract=892971

Oriol Carbonell-Nicolau (Contact Author)

Rutgers University ( email )

Department of Economics
75 Hamilton Street
New Brunswick, NJ 08901
United States
732-932-8621 (Phone)
732-932-7416 (Fax)

Efe A. Ok

Leonard N. Stern School of Business - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States
212-998-8920 (Phone)
212-995-4186 (Fax)

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