The scope of political redistribution with proportional income taxation

David Lopez-Rodriguez ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the politicians �incentives to pursue income redistribution when governments are constrained to levy taxes on labor income and this creates distortions. Politicians who strive to be elected may strategically redistribute through in-kind rather than cash transfers and overprovide consumption of goods. I show that the overprovision of in-kind transfers reduces the disincentive e¤ects of taxation in labor effort and enlarges the pool of resources for political redistribution. As a result, politicians are able to implement larger redistributive transfers and improve the well-being of swing voters. Hence, electoral competition for pivotal voters provides politicians incentives to implement redistributive schedules that reduce distortions in labor markets and improve the e¢ ciency of the taxation system.

Keywords: political income redistribution; swing voters; political distortions; in-kind transfers (search for similar items in EconPapers)
JEL-codes: D72 H21 H24 H42 (search for similar items in EconPapers)
Date: 2011, Revised 2012
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https://mpra.ub.uni-muenchen.de/44150/1/MPRA_paper_44150.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/44170/1/MPRA_paper_44170.pdf revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:44150

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