Tax reform and the political economy of the tax base

Ethan Ilzetzki

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper studies the political prospects for reform in a model where the tax base and statutory rate are separate instruments of tax policy. The model suggests that large changes in the tax code may be easier to enact than marginal reforms. The tax base faces a tipping point where even the beneficiaries from tax exemptions support reform. At this tipping point, tax reform is Pareto improving. Politically feasible tax reform occurs when fiscal needs are large, but may nonetheless involve reductions in marginal tax rates. There is strategic complementary in lobbying for tax exemptions, resulting in multiple equilibria. The model’s main predictions are consistent with recent tax reforms in OECD countries.

JEL-codes: D72 D78 H26 (search for similar items in EconPapers)
Date: 2018-08-01
New Economics Papers: this item is included in nep-pbe
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Citations: View citations in EconPapers (4)

Published in Journal of Public Economics, 1, August, 2018, 164, pp. 197-210. ISSN: 0047-2727

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http://eprints.lse.ac.uk/88182/ Open access version. (application/pdf)

Related works:
Journal Article: Tax reform and the political economy of the tax base (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:88182

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