The Interaction of Tax Exemptions and Individual Tax Reform Preferences

Salvatore Barbaro () and Jens Suedekum

No 1543, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The individual voting behavior on the abolishment of single income-tax exemptions crucially depends on how strongly agents are affected by other deduction possibilities that are not at stake in the reform plans of the government. The interactions depend (i) on the shape of the tax schedule, and (ii) on how the government wants to use the revenue that is generated by the cut of tax privileges. If government plans to increase redistribution in form of lump-sum transfers, then the political chances of a tax reform increase with the existence of other deduction possibilities under progressive taxation. With proportional taxation and a budget-enlargement policy, the voting decision depends only on the particular tax privileges at stake. Matters are different if the government wants to adopt a revenue-neutral tax-cut-cum-base-broadening policy. Except for strong progression, it is less likely that an agent supports the elimination of tax privileges the stronger she is affected by other exemptions in the back.

Keywords: income tax reform; public choice (search for similar items in EconPapers)
JEL-codes: D72 D74 (search for similar items in EconPapers)
Pages: 11 pages
Date: 2005-03
New Economics Papers: this item is included in nep-pol and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published - substantially revised version published as 'Voting on income tax exemptions' in: Public Choice, 2009, 138 (1-2), 239-253

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