Summary
This paper presents a simple model of the ‘tax state’, where a progressive income tax is used to finance publicly supplied goods that are distributed free of charge. The individual citizens may be dissatisfied with such a fiscal system. If more than 50% are dissatisfied, we speak of a ‘crisis of the tax state’.
Such a crisis becomes more probable, if the allocational and distributional instruments are chosen inadequately, if the disincentive effects of the progressive tax increase and if the inefficiency of public supply increases. Paradoxically such a crisis becomes more improbable, if people want a smaller public sector.
Moreover, it has been shown that the psychological attitudes of the consumers and the inefficiency of public supply may bring about an ‘absolute’ crisis of the tax state. In such a situation there do not exist any realizations of tax-state instruments that are supported by a majority.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Aitchison, J., and Brown, J. A. C. (1969). The lognormal distribution with special reference to its use in economics. Cambridge University Press.
Atkinson, A. B., and Stiglitz, J. E. (1980). Lectures on public economics. McGraw-Hill.
Blankart, C. B. (1980). Ökonomie der öffentlichen Unternehmen. Vahlen.
Bös, D. (1980a). The democratic decision on fees versus taxes. Kyklos 33: 76–99.
Bös, D. (1980). Over- and undersupply of public goods. Bonn. Mimeo.
Bös, D. (1981). Krise des Steuerstaates II. Bonn. Mimeo.
Bös, D., Musgrave, R. A., and Wiseman, J. (Eds.) (1982). Public production. Zeitschrift für Nationalökonomie 42(supplementum).
Borcherding, T. E. (1980). Toward a positive theory of public sector supply arrangements. Stanford. Mimeo.
Feldstein, M. (1973). Optimal income tax progressivity. Journal of Public Economics 2: 357–376.
Ladd, H. F., and Wilson, J. B. (1981). Proposition 2 1/2 Explaining the vote. Cambridge, Mass. Mimeo.
Romer, T., and Rosenthal, H. (1979a). The elusive median voter. Journal of Public Economics 12: 143–170.
Romer, T., and Rosenthal, H. (1979b). Voters versus bureaucrats: On the political economy of resource allocation by direct democracy. Quarterly Journal of Economics 93: 563–587.
Schumpeter, J. A. (1918). Die Krise des Steuerstaats. Leuschener and Lubinsky.
Usher, D. (1977). The welfare economics of the socialization of commodities. Journal of Public Economics 8: 151–168.
Author information
Authors and Affiliations
Additional information
I gratefully acknowledge that the title of this paper was first used by Joseph A. Schumpeter (1918). Needless to say that only I am responsible for the content of the present paper.
I gratefully acknowledge discussions on an earlier draft of this paper by Gabor Gyárfás and Ruth Watzke (Bonn), as well as by Geoffrey Brennan, James Buchanan, Gordon Tullock and some further members of the Wednesday-evening seminar at the Public Choice Center in Blacksburg. Needless to say that only I am responsible for any remaining faults.
Rights and permissions
About this article
Cite this article
Bös, D. Crisis of the tax state. Public Choice 38, 225–241 (1982). https://doi.org/10.1007/BF00144848
Issue Date:
DOI: https://doi.org/10.1007/BF00144848