Redistributive Taxation and Public Expenditures

Sanghamitra Bandyopadhyay () and Joan Esteban ()

No 366, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: We introduce a model of redistributive income taxation and public expenditure. Besides redistributing personal income by means of taxes and transfers, the government supplies goods and services. The government chooses the tax schedule that is found acceptable by the largest share possible of the population. We show that there is a unique income tax schedule that is universally acceptable. The progressivity of the income tax is shown to depend on the composition of the public expenditure and on the substitutability between the goods and services supplied by the government and the consumption goods privately obtained through the market. We test the empirical implications of the model. Specifically, we use OECD data to observe the relationship between marginal tax rates and the distribution over the taxpayers of the benefits produced by the specific composition of the government expenditure in the provision of goods and services. We confirm that for lower elasticities of substitution between public and private goods, there is a negative relationship between marginal tax rates and pro-taxpayer-bias, and for higher elasticities, there is a positive relationship.

Keywords: Government Policy; Income Taxation; Public Expenditure (search for similar items in EconPapers)
JEL-codes: H23 H50 O50 (search for similar items in EconPapers)
Date: 2007-10-01
New Economics Papers: this item is included in nep-pbe and nep-pub
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://ora.ox.ac.uk/objects/uuid:d1caeae7-4036-4f85-b03c-3cef1a11cdf9 (text/html)

Related works:
Working Paper: Redistributive Taxation and PublicExpenditures (2007)
Working Paper: Redistributive taxation and public expenditures (2007)
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:oxf:wpaper:366

Access Statistics for this paper

More papers in Economics Series Working Papers from University of Oxford, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Anne Pouliquen ( this e-mail address is bad, please contact ).