Majority Voting and the Welfare Implications of Tax Avoidance

Christian Traxler

No 2009_22, Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods

Abstract: A benchmark result in the political economy of taxation is that majority voting over a linear income tax schedule will result in an ine±ciently high tax rate whenever the median voter has a below average income. The present paper examines the role of tax avoidance for this welfare assessment. We find that the inefficiency in the voting equilibrium is the lower, the higher the average level of tax avoidance in the economy, or equivalently, the lower the median voter's amount of avoidance. The result holds for endogenous avoidance and labor choice and, under certain conditions, for an endogenous enforcement policy.

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: 2009-07
New Economics Papers: this item is included in nep-cdm, nep-pbe and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Majority voting and the welfare implications of tax avoidance (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:mpg:wpaper:2009_22

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