Tax rules

Hans Gersbach, Volker Hahn and Stephan Imhof ()

Social Choice and Welfare, 2013, vol. 41, issue 1, 19-42

Abstract: Tax schemes are more restricted by constitutional rules than subsidies. We introduce a model of public good provision with incentive problems in agenda-setting and identify several advantages of restrictions on tax schemes. In particular, tax rules may prevent the proposal and adoption of inefficient projects that benefit only a small minority. We also propose “redistribution efficiency” as a socially desirable property of proposals and find that tax rules guarantee this kind of efficiency. Moreover, a constitution that requires certain restrictions on both taxes and subsidies satisfies a criterion we label “robustness against counter-proposals.” We provide an axiomatic characterization of this constitution. Finally, we perform utilitarian welfare comparisons. Copyright Springer-Verlag 2013

Date: 2013
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DOI: 10.1007/s00355-012-0675-1

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