Majority voting and the welfare implications of tax avoidance

Christian Traxler

Journal of Public Economics, 2012, vol. 96, issue 1, 1-9

Abstract: A benchmark result in the political economy of taxation is that majority voting over a linear income tax schedule will result in an inefficiently high tax rate whenever the median voter has a below-average income. The present paper examines the role of tax avoidance for this welfare result. For a right-skewed distribution of taxed income, we show that the political distortion from majority voting is increasing in the median voter's avoidance. Vice versa, keeping the decisive voter's avoidance constant, the political inefficiency is decreasing in the average level of avoidance in the economy.

Keywords: Tax avoidance; Welfare analysis; Majority voting; Median voter equilibrium (search for similar items in EconPapers)
JEL-codes: D6 D72 H26 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (20)

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Related works:
Working Paper: Majority Voting and the Welfare Implications of Tax Avoidance (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:96:y:2012:i:1:p:1-9

DOI: 10.1016/j.jpubeco.2011.07.006

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