On the Political Economics of Tax Reforms

Micael Castanheira, Gaëtan J.A. Nicodème, Paola Profeta and Gaëtan J.A. Nicodeme
Authors registered in the RePEc Author Service: Gaetan J.A. Nicodeme

No 3538, CESifo Working Paper Series from CESifo

Abstract: There is often a gap between the prescriptions of an “optimal” tax system and actual tax systems, some of which can be neither efficient economically nor efficient at redistributing income. With a focus on personal income taxes, this paper reviews the political economics literature on tax systems and reforms to see whether political mechanisms allow us to better understand why tax systems look the way they look. Finally, we exploit a database of reforms in labour taxation in the European Union to check the determinants of all reforms, on the one hand, and of targeted reforms, on the other hand. The results fit well with political economy theories and show that political variables carry more weight in triggering reforms than economic variables. This shed light on whether and how tax reforms are achievable. It also explains why many reforms that seem economically optimal fail to be implemented.

Keywords: political economy; taxation; personal income tax (search for similar items in EconPapers)
JEL-codes: H11 H21 H24 P16 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Working Paper: On the political economics of tax reforms (2011)
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