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The Uneasy Case for the Flat Tax

F. H. Buckley

George Mason University School of Law

Eric Bennett Rasmusen

Indiana University - Department of Business Economics & Public Policy

July 13, 1999

Constitutional Political Economy

Social contract theories assume that because personal security and private property are at risk in a state of nature, citizens will agree to grant Leviathan a monopoly of violence. But what is to prevent Leviathan from turning on his citizens once they have lain down their arms? The social contract leaves citizens worse off unless Leviathan can fetter himself, as constitutional democracies seek to do. Self-binding fetters are hard to find. We suggest that schemes of progressive taxation, in which marginal tax rates increase with taxable income, may be useful incentives to realign Leviathan's incentives with those of his citizens. Income taxes give Leviathan an equity claim in his state's economy, and progressive taxes give him a greater residual interest in upside payoffs. Leviathan will then demand higher side payments from interest groups before he imposes value-destroying regulations.

Number of Pages in PDF File: 32

JEL Classification: H00, H11, H21, H50, L50, L51, P00

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Date posted: July 26, 1999  

Suggested Citation

Buckley, F. H. and Rasmusen, Eric Bennett, The Uneasy Case for the Flat Tax (July 13, 1999). Constitutional Political Economy. Available at SSRN: http://ssrn.com/abstract=172065 or http://dx.doi.org/10.2139/ssrn.172065

Contact Information

Francis (Frank) H. Buckley
George Mason University School of Law ( email )
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Eric Bennett Rasmusen (Contact Author)
Indiana University - Department of Business Economics & Public Policy ( email )
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812-855-9219 (Phone)
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