Abstract
This paper studies majority voting on taxes when tax evasion is possible. We characterize the voting equilibrium where the agent with median taxed income is pivotal. Since the ranking of true incomes does not necessarily correspond to the ranking of taxed incomes, the decisive voter can differ from the median income receiver. In this case, we find unconventional patterns of redistribution, e.g., from the middle class to the poor and the rich.
Article PDF
Similar content being viewed by others
Avoid common mistakes on your manuscript.
References
Ahrend, R., & Winograd, C. (2006). The political economy of mass privatisation and imperfect taxation: winners and loosers. Public Choice, 126(1), 201–224.
Ahrend, R., Verdier, T., & Winograd, C. (2007). The political economy of inflation, demonetisation, and redistribution. Why and when monetary disorder ends? Mimeo, DELTA–Ecole Normale Superieure.
Allingham, M., & Sandmo, A. (1972). Income tax evasion: a theoretical analysis. Journal of Public Economics, 1, 323–338.
Andreoni, J., Erard, B., & Feinstein, J. (1998). Tax compliance. Journal of Economic Literature, 36, 818–860.
Barbaro, S., & Südekum, J. (2009). Voting on income-tax exemptions. Public Choice, 138(1), 239–253.
Bergström, F., & Gidehag, R. (2003). Sweden’s black economy. Axess, 8–2003.
Bloomquist, K. M. (2003). Tax evasion, income inequality and opportunity costs of compliance. Proceedings of the National Tax Association, 96th Annual Conference, Chicago.
Borck, R. (2009). Voting on redistribution with tax evasion. Social Choice and Welfare, 32, 439–452.
Cowell, F. A. (1990). Tax sheltering and the cost of evasion. Oxford Economic Papers, 42(1), 231–243.
Cox, D. (1984). Raising revenue in the underground economy. National Tax Journal, 37(3), 283–288.
Cremer, H., & Gahvari, F. (1993). Tax evasion and optimal commodity taxation. Journal of Public Economics 50, 261–275.
Engström, P., & Holmlund, B. (2006). Tax evasion and self-employment in a high-tax country: evidence from Sweden. CESifo Working Paper No. 1736.
Epple, D., & Romano, R. E. (1996). Ends against the middle: determining public service provision when there are private alternatives. Journal of Public Economics, 62, 297–325.
Feldstein, M. (1995). The effect of marginal tax rates on taxable income: a panel study of the 1986 tax reform act. Journal of Political Economy, 103(3), 551–572.
Fiorio, C., & D’Amuri, F. (2005). Workers’ tax evasion in Italy. Bocconi University, Giornale degli Economisti, 64(2–3), 247–270.
Fratanduono, R. J. (1986). Trends in voluntary compliance of taxpayers filing individual tax returns. In IRS Research Division (Ed.), Trend analyses and related statistics: 1986 (IRS Document 6011), Washington.
Frey, B. S., & Feld, L. (2002). Deterrence and morale in taxation: an empirical analysis. CESifo Working Paper No. 760.
Gans, J. S., & Smart, M. (1996). Majority voting with single-crossing preferences. Journal of Public Economics, 59(2), 219–237.
Gërxhani, K. (2004). The informal sector in developed and less developed countries: a literature survey. Public Choice, 120(3–4), 267–300.
Goolsbee, A. (2000). What happens when you tax the rich? Evidence from executive compensation. Journal of Political Economy, 108(2), 352–378.
Gouveia, M. (1997). Majority rule and the public provision of a private good. Public Choice, 93(3–4), 221–244.
Gruber, J., & Saez, E. (2002). The elasticity of taxable income: evidence and implications. Journal of Public Economics, 84(1), 1–32.
Kopczuk, W. (2001). Redistribution when avoidance behavior is heterogeneous. Journal of Public Economics, 81(1), 51–71.
Lemieux, T., Fortin, B., & Frechette, P. (1994). The effect of taxes on labor supply in the underground economy. American Economic Review, 84(1), 231–254.
Meltzer, A. H., & Richard, S. F. (1981). A rational theory of the size of government. Journal of Political Economy, 89, 914–927.
Mogensen, G. V. (2004). Skattesnyderiet og indkomstfordelingen. In Skat (Ed.), Skat–April 2004, Skatteministeriet, Kobenhavn. Available online at (last accessed 01 Feb. 2009) www.skm.dk/publikationer/skat/skatau-april2004/skattesnyderietogindkomstfordelingen/.
Persson, T., & Tabellini, G. (2000). Political economics: explaining economic policy. Cambridge: MIT.
Roberts, K. (1977). Voting over income tax schedules. Journal of Public Economics, 8, 329–340.
Roine, J. (2003). Voting over tax schedules in the presence of tax avoidance. SSE/EFI Working Paper 529, Stockholm University.
Roine, J. (2006). The political economy of not paying taxes. Public Choice, 126(1–2), 107–134.
Romer, T. (1975). Individual welfare, majority voting and the properties of a linear income tax. Journal of Public Economics, 4, 163–185.
Roth, J. A., Scholz, J. T., & Witte, A. D. (1989). Taxpayer compliance, Vol. 1: An agenda for research. Philadelphia: University of Pennsylvania Press.
Slemrod, J. (1994). On the high income laffer curve. In J. Slemrod (Ed.), Tax progressivity and income inequality. Cambridge: Cambridge University Press.
Slemrod, J. (2001). A general model of the behavioral response to taxation. International Tax and Public Finance, 8(2), 119–128.
Slemrod, J. (2007). Cheating ourselves: the economics of tax evasion. Journal of Economic Perspectives, 21(1), 25–48.
Stöwhase, S., & Traxler, C. (2005). Tax evasion and auditing in a federal economy. International Tax and Public Finance, 12(4), 515–531.
Tedds, L. (2008). Estimating the income reporting function for the self-employed. Mimeo, University of Victoria.
Traxler, C. (2006). Voting over taxes: the case of tax evasion. Discussion Papers in Economics 1188, University of Munich, Department of Economics.
Yitzhaki, S. (1974). A note on income tax evasion: a theoretical analysis. Journal of Public Economics, 3, 201–202.
Young, M., Reksulak, M., & Shughart, W. F. (2001). The political economy of the IRS. Economics and Politics, 13(2), 201–220.
Author information
Authors and Affiliations
Corresponding author
Additional information
This article is based on sections 1–3 in Traxler (2006).
Rights and permissions
Open Access This is an open access article distributed under the terms of the Creative Commons Attribution Noncommercial License (https://creativecommons.org/licenses/by-nc/2.0), which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.
About this article
Cite this article
Traxler, C. Voting over taxes: the case of tax evasion. Public Choice 140, 43–58 (2009). https://doi.org/10.1007/s11127-009-9411-5
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11127-009-9411-5