[go: up one dir, main page]
More Web Proxy on the site http://driver.im/
IDEAS home Printed from https://ideas.repec.org/a/sae/jothpo/v31y2019i1p66-102.html
   My bibliography  Save this article

Incentives for progressive income taxation

Author

Listed:
  • M Socorro Puy
Abstract
This study analyzes the electoral incentives for redistributive income taxation when the incumbent strategically decides the degree of tax progressivity. Progressivity makes the median voter prefer more government spending, which induces left-wing incumbents to foster progressivity and right-wing incumbents to propose flat taxation. However, if (i) more progressivity reduces middle-income voters’ fear of left-wing policies with respect to right-wing policies, (ii) parties’ office holding incentives are high, and (iii) there is low uncertainty about the median voter, then left-wing incumbents opt for less-progressive taxation and right-wing incumbents opt for more progressive taxation. In addition, we show that voters’ risk aversion over private consumption implies that right-wing incumbents propose more progressivity in comparison with left-wing incumbents proposing less progressivity. Our theoretical prediction can explain why, for example, Democrat Kennedy contributed to decreasing progressive taxation and Republican Bush contributed to increasing progressive taxation.

Suggested Citation

  • M Socorro Puy, 2019. "Incentives for progressive income taxation," Journal of Theoretical Politics, , vol. 31(1), pages 66-102, January.
  • Handle: RePEc:sae:jothpo:v:31:y:2019:i:1:p:66-102
    DOI: 10.1177/0951629818809420
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0951629818809420
    Download Restriction: no

    File URL: https://libkey.io/10.1177/0951629818809420?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Marhuenda, Francisco & Ortuno-Ortin, Ignacio, 1995. "Popular support for progressive taxation," Economics Letters, Elsevier, vol. 48(3-4), pages 319-324, June.
    2. Iversen, Torben & Soskice, David, 2006. "Electoral Institutions and the Politics of Coalitions: Why Some Democracies Redistribute More Than Others," American Political Science Review, Cambridge University Press, vol. 100(2), pages 165-181, May.
    3. Carbonell-Nicolau, Oriol & Klor, Esteban F., 2003. "Representative democracy and marginal rate progressive income taxation," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 2339-2366, September.
    4. Thomas Piketty & Emmanuel Saez, 2007. "How Progressive is the U.S. Federal Tax System? A Historical and International Perspective," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 3-24, Winter.
    5. Guiso, Luigi & Jappelli, Tullio & Terlizzese, Daniele, 1996. "Income Risk, Borrowing Constraints, and Portfolio Choice," American Economic Review, American Economic Association, vol. 86(1), pages 158-172, March.
    6. Snyder, James M. & Kramer, Gerald H., 1988. "Fairness, self-interest, and the politics of the progressive income tax," Journal of Public Economics, Elsevier, vol. 36(2), pages 197-230, July.
    7. Louis Eeckhoudt & Harris Schlesinger, 2006. "Putting Risk in Its Proper Place," American Economic Review, American Economic Association, vol. 96(1), pages 280-289, March.
    8. Martínez-Mora Francisco & Puy M. Socorro, 2012. "Asymmetric Single-peaked Preferences," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 12(1), pages 1-26, December.
    9. Rothstein, Paul, 1991. "Representative Voter Theorems," Public Choice, Springer, vol. 72(2-3), pages 193-212, December.
    10. De Donder, Philippe & Hindriks, Jean, 2003. "The politics of progressive income taxation with incentive effects," Journal of Public Economics, Elsevier, vol. 87(11), pages 2491-2505, October.
    11. Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January.
    12. Sobel, Russell S, 1998. "The Political Costs of Tax Increases and Expenditure Reductions: Evidence from State Legislative Turnover," Public Choice, Springer, vol. 96(1-2), pages 61-79, July.
    13. Kimball, Miles S, 1993. "Standard Risk Aversion," Econometrica, Econometric Society, vol. 61(3), pages 589-611, May.
    14. Roemer, John E., 1998. "Why the poor do not expropriate the rich: an old argument in new garb," Journal of Public Economics, Elsevier, vol. 70(3), pages 399-424, December.
    15. Martínez-Mora, Francisco & Puy, M. Socorro, 2014. "The determinants and electoral consequences of asymmetric preferences," European Journal of Political Economy, Elsevier, vol. 33(C), pages 85-97.
    16. Milanovic, Branko, 2000. "The median-voter hypothesis, income inequality, and income redistribution: an empirical test with the required data," European Journal of Political Economy, Elsevier, vol. 16(3), pages 367-410, September.
    17. Bueno de Mesquita, Bruce & Downs, George & Smith, Alastair, 2017. "A Political Economy of Income Tax Policies," Political Science Research and Methods, Cambridge University Press, vol. 5(1), pages 1-29, January.
    18. John E. Roemer, 1999. "The Democratic Political Economy of Progressive Income Taxation," Econometrica, Econometric Society, vol. 67(1), pages 1-20, January.
    19. Carbonell-Nicolau, Oriol & Ok, Efe A., 2007. "Voting over income taxation," Journal of Economic Theory, Elsevier, vol. 134(1), pages 249-286, May.
    20. John E. Roemer, 2006. "Will Democracy Engender Equality?," Studies in Economic Theory, in: Christian Schultz & Karl Vind (ed.), Institutions, Equilibria and Efficiency, chapter 18, pages 331-349, Springer.
    21. Hansen, Lars Peter & Singleton, Kenneth J, 1982. "Generalized Instrumental Variables Estimation of Nonlinear Rational Expectations Models," Econometrica, Econometric Society, vol. 50(5), pages 1269-1286, September.
    22. Wittman, Donald, 1983. "Candidate Motivation: A Synthesis of Alternative Theories," American Political Science Review, Cambridge University Press, vol. 77(1), pages 142-157, March.
    23. Gans, Joshua S. & Smart, Michael, 1996. "Majority voting with single-crossing preferences," Journal of Public Economics, Elsevier, vol. 59(2), pages 219-237, February.
    24. Carbonell-Nicolau Oriol, 2009. "A Positive Theory of Income Taxation," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-49, July.
    25. Shepsle, Kenneth A., 1972. "The Strategy of Ambiguity: Uncertainty and Electoral Competition," American Political Science Review, Cambridge University Press, vol. 66(2), pages 555-568, June.
    26. Guiso, Luigi & Jappelli, Tullio & Terlizzese, Daniele, 1992. "Earnings uncertainty and precautionary saving," Journal of Monetary Economics, Elsevier, vol. 30(2), pages 307-337, November.
    27. Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65(2), pages 135-135.
    28. N. Gregory Mankiw & Julio J. Rotemberg & Lawrence H. Summers, 1985. "Intertemporal Substitution in Macroeconomics," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(1), pages 225-251.
    29. Young, H. P., 1988. "Distributive justice in taxation," Journal of Economic Theory, Elsevier, vol. 44(2), pages 321-335, April.
    30. John Roemer, 2012. "The political economy of income taxation under asymmetric information: the two-type case," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 3(1), pages 181-199, March.
    31. Carbonell-Nicolau, Oriol & Klor, Esteban F., 2003. "Erratum to "Representative democracy and marginal rate progressive income taxation": [J. Public Economics, 87 (2003) 1137-1164]," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 2337-2337, September.
    32. Åsa Johansson & Chistopher Heady & Jens Matthias Arnold & Bert Brys & Laura Vartia, 2008. "Taxation and Economic Growth," OECD Economics Department Working Papers 620, OECD Publishing.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Krajňák Michal, 2023. "Does the Type of Nominal Personal Income Tax Rate Affect Its Progressivity? A Case Study from the Czech Republic," Business Systems Research, Sciendo, vol. 14(1), pages 93-111, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Martínez-Mora, Francisco & Puy, M. Socorro, 2014. "The determinants and electoral consequences of asymmetric preferences," European Journal of Political Economy, Elsevier, vol. 33(C), pages 85-97.
    2. repec:hal:spmain:info:hdl:2441/eu4vqp9ompqllr09i8hj22lpn is not listed on IDEAS
    3. Zsofia Barany, 2011. "Income inequality and the progressivity of taxes in a coalition formation model," Working Papers hal-00972940, HAL.
    4. repec:spo:wpmain:info:hdl:2441/eu4vqp9ompqllr09i8hj22lpn is not listed on IDEAS
    5. Carbonell-Nicolau Oriol, 2009. "A Positive Theory of Income Taxation," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-49, July.
    6. repec:spo:wpecon:info:hdl:2441/eu4vqp9ompqllr09i8hj22lpn is not listed on IDEAS
    7. repec:hal:wpspec:info:hdl:2441/eu4vqp9ompqllr09i8hj22lpn is not listed on IDEAS
    8. Zsofia Barany, 2011. "Income inequality and the progressivity of taxes in a coalition formation model," SciencePo Working papers hal-00972940, HAL.
    9. Daniel R. Carroll, 2013. "The demand for income tax progressivity in the growth model," Working Papers (Old Series) 1106, Federal Reserve Bank of Cleveland.
    10. Marcus Berliant & Pierre C. Boyer, 2024. "Politics and income taxes: Progress and progressivity," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 26(4), August.
    11. Jenny de Freitas, 2009. "A probabilistic voting model of progressive taxation with incentive effects," Hacienda Pública Española / Review of Public Economics, IEF, vol. 190(3), pages 9-26, September.
    12. Carbonell-Nicolau, Oriol & Llavador, Humberto, 2018. "Inequality reducing properties of progressive income tax schedules: the case of endogenous income," Theoretical Economics, Econometric Society, vol. 13(1), January.
    13. Bierbrauer, Felix J. & Boyer, Pierre C., 2013. "Political competition and Mirrleesian income taxation: A first pass," Journal of Public Economics, Elsevier, vol. 103(C), pages 1-14.
    14. Soumyanetra Munshi, 2011. "On existence of pure strategy equilibrium with endogenous income," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 37(1), pages 1-37, June.
    15. Charles N. Noussair & Stefan T. Trautmann & Gijs van de Kuilen, 2014. "Higher Order Risk Attitudes, Demographics, and Financial Decisions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 81(1), pages 325-355.
    16. Jo Thori Lind & Dominic Rohner, 2017. "Knowledge is Power: A Theory of Information, Income and Welfare Spending," Economica, London School of Economics and Political Science, vol. 84(336), pages 611-646, October.
    17. Orazio P. Attanasio, 1998. "Consumption Demand," NBER Working Papers 6466, National Bureau of Economic Research, Inc.
    18. Rafael Salas & Juan Gabriel Rodríguez, 2010. "Popular support for egalitarian social welfare," Working Papers 171, ECINEQ, Society for the Study of Economic Inequality.
    19. Rafael Salas & Juan Rodríguez, 2013. "Popular support for social evaluation functions," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 40(4), pages 985-1014, April.
    20. John Roemer, 2012. "The political economy of income taxation under asymmetric information: the two-type case," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 3(1), pages 181-199, March.
    21. Francisco Martínez-Mora & M. Socorro Puy, 2009. "Off-the-peak preferences over government size," Working Papers 2009-9, Universidad de Málaga, Department of Economic Theory, Málaga Economic Theory Research Center.
    22. Brett, Craig & Weymark, John A., 2016. "Voting over selfishly optimal nonlinear income tax schedules with a minimum-utility constraint," Journal of Mathematical Economics, Elsevier, vol. 67(C), pages 18-31.
    23. Micael Castanheira & Gaëtan Nicodème & Paola Profeta, 2012. "On the political economics of tax reforms: survey and empirical assessment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(4), pages 598-624, August.
    24. Jo Thori Lind, 2005. "Why is there so little redistribution?," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 31, pages 111-125.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:jothpo:v:31:y:2019:i:1:p:66-102. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.