The political economy of endogenous taxation and redistribution

Jim Dolmas and Gregory Huffman

No 9704, Working Papers from Federal Reserve Bank of Dallas

Abstract: This paper examines a simple dynamic model in which agents vote over capital income taxation and redistributive transfers. We show that in equilibrium the typical agent's preferences over the tax rate are single-peaked and derive a closed-form solution for the majority-rule tax rate. We also show that high levels of initial wealth inequality can place the economy on the 'wrong side of the Laffer curve'.

Keywords: Voting; political economy; redistributive taxation (search for similar items in EconPapers)
JEL-codes: D72 E60 E62 (search for similar items in EconPapers)
Pages: 7 pages
Date: 1997
Note: Published as: Dolmas, Jim and Gregory W. Huffman (1997), "The Political Economy of Endogenous Taxation and Redistribution," Economics Letters 56 (2): 223-227.
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Citations: View citations in EconPapers (5)

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