Majority Voting, Progressive Taxation, and Income Inequality

Creina Day and Garth Day

Review of Political Economy, 2023, vol. 35, issue 4, 1124-1135

Abstract: A challenge for the political economy literature is why the average tax rate becomes less progressive while wage inequality increases with the skill premium. This paper contributes to the literature by developing a majority voting equilibrium model in which households choose their most preferred tax schedule under increasing inequality. We find that majority voting favors a marginal tax rate to fund transfers, where the average tax rate increases with income, when the median skill level lies below the mean skill level. The average tax rate becomes less progressive when required government revenue relative to mean skill increases. These findings reconcile the literature with recent empirical trends and are robust to relaxing the assumptions of exogenous government spending and endogenous labor supply.

Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/09538259.2021.1996064 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:revpoe:v:35:y:2023:i:4:p:1124-1135

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/CRPE20

DOI: 10.1080/09538259.2021.1996064

Access Statistics for this article

Review of Political Economy is currently edited by Steve Pressman and Louis-Philippe Rochon

More articles in Review of Political Economy from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().