Do Political Incentives Matter for Tax Policies? Ideology, Opportunism and the Tax Structure

32 Pages Posted: 27 Mar 2009

See all articles by Konstantinos Angelopoulos

Konstantinos Angelopoulos

Athens University of Economics and Business - Department of International and European Economic Studies

George Economides

Athens University of Economics and Business - Department of International and European Economic Studies

Pantelis Kammas

University of Ioannina - Department of Economics

Date Written: March, 27 2009

Abstract

This paper investigates the importance of political ideology and opportunism in the choice of the tax structure. In particular, we examine the effects of cabinet ideology and elections on the distribution of the tax burden across factors of production and consumption for 21 OECD countries over the period 1970-2000 by employing four alternative cabinet ideology measures and by using the methodology of effective tax rates. There is evidence of both opportunistic and partisan effects on tax policies. More precisely, we find that left-wing governments rely more on capital relative to labor income taxation and that they tend to increase consumption taxes. Moreover, we find that income tax rates (but not consumption taxes) tend to be reduced in pre-electoral periods and that capital effective tax rates (defined broadly to include taxes on self-employed income) are reduced by more than effective labor tax rates.

Keywords: tax structure; political economy; partisan and opportunistic effects

JEL Classification: H2, H1

Suggested Citation

Angelopoulos, Konstantinos and Economides, George and Kammas, Pantelis, Do Political Incentives Matter for Tax Policies? Ideology, Opportunism and the Tax Structure (March, 27 2009). Available at SSRN: https://ssrn.com/abstract=1369309 or http://dx.doi.org/10.2139/ssrn.1369309

Konstantinos Angelopoulos

Athens University of Economics and Business - Department of International and European Economic Studies ( email )

GR-10434 Athens
Greece

George Economides (Contact Author)

Athens University of Economics and Business - Department of International and European Economic Studies ( email )

GR-10434 Athens
Greece
+30-210-8214122 (Phone)
+30-210-8203729 (Fax)

Pantelis Kammas

University of Ioannina - Department of Economics ( email )

University of Ioannina
Department of Economics P.O. Box 1186
Ioannina, 45110
Greece

HOME PAGE: http://users.uoi.gr/kammas

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