The political economics of redistribution, inequality and tax avoidance

Carlos Bethencourt and Lars Kunze

MPRA Paper from University Library of Munich, Germany

Abstract: A benchmark result in the political economy of taxation is that the degree of redistribution is positively linked to income inequality. However, empirical evidence supporting such a relationship turns out to be mixed. This paper shows how these different empirical reactions can be rationalized within a simple model of tax avoidance and costly tax enforcement. By focussing on structure induced equilibria in which taxpayers vote over the size of the income tax and the level of tax enforcement, we show that higher inequality may well decrease the extent of redistribution, depending on two opposing effects: the standard political effect and a negative tax base effect working through increases in the average level of tax avoidance and the share of enforcement expenditures in total tax revenue.

Keywords: Tax avoidance; Voting; Redistribution (search for similar items in EconPapers)
JEL-codes: D72 H26 H31 (search for similar items in EconPapers)
Date: 2013-10-31
New Economics Papers: this item is included in nep-cdm, nep-iue, nep-pbe and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://mpra.ub.uni-muenchen.de/51127/1/MPRA_paper_51127.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/51146/1/MPRA_paper_51127.pdf revised version (application/pdf)

Related works:
Journal Article: The political economics of redistribution, inequality and tax avoidance (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:51127

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