Why Don’t We Tax the Rich? Inequality, Legislative Malapportionment, and Personal Income Taxation Around the World

46 Pages Posted: 14 Dec 2011

See all articles by Martin Ardanaz

Martin Ardanaz

Columbia University

Carlos Scartascini

Research Department - Inter-American Development Bank (IDB)

Date Written: November 2011

Abstract

Personal income taxation remains relatively low in many developing countries despite recent democratic advancement and rapid economic growth; this is hard to reconcile with standard political economy models of taxation. This paper argues that the details of political institutions help to explain these low levels of personal income taxation. In particular, legislative malapportionment enables rich elites to have disproportionate political influence. Because over-represented districts tend to be dominated by parties aligned with the elite, these groups can block legislative attempts to introduce progressive taxes. Using a sample of more than 50 countries (including 17 across Latin America) between 1990 and 2007, this paper finds that i) countries with historically more unequal distributions of wealth and income systematically present higher levels of legislative malapportionment, and ii) higher levels of malapportionment are associated with lower shares of personal income taxes in GDP.

Suggested Citation

Ardanaz, Martin and Scartascini, Carlos G., Why Don’t We Tax the Rich? Inequality, Legislative Malapportionment, and Personal Income Taxation Around the World (November 2011). IDB Working Paper No. IDB-WP-282, Available at SSRN: https://ssrn.com/abstract=1972115 or http://dx.doi.org/10.2139/ssrn.1972115

Martin Ardanaz (Contact Author)

Columbia University ( email )

3022 Broadway
New York, NY 10027
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Carlos G. Scartascini

Research Department - Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States
2026231963 (Phone)

HOME PAGE: http://www.cscartascini.org

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