Political Conflicts, the Role of Opposition Parties, and the Limits on Taxation

Journal of Theoretical Politics, Forthcoming

27 Pages Posted: 21 Oct 2012 Last revised: 15 Jun 2018

See all articles by Stephane Wolton

Stephane Wolton

London School of Economics & Political Science (LSE) - Department of Government

Date Written: June 11, 2014

Abstract

In democratic systems, the rich have diverse channels to influence policies. In a model of taxation, I study the capacity of the rich to constrain the fiscal choice of a government by starting a costly political conflict (for example, a press campaign), which imposes a cost on the government and influence the fate of the government's fiscal plan. I show that the government's tax proposal depends critically on the marginal disutility of taxation for the rich. This approach provides a new rationale for the empirically documented U-shaped relationship between inequality and taxation. It also highlights a new role for opposition parties. By agreeing to bear part of the cost of a political conflict in exchange for compromise, the opposition makes Pareto-improving arrangements possible.

Keywords: taxation, opposition, coalition, inequality

JEL Classification: D72, D78, D74, H20

Suggested Citation

Wolton, Stephane, Political Conflicts, the Role of Opposition Parties, and the Limits on Taxation (June 11, 2014). Journal of Theoretical Politics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2164784 or http://dx.doi.org/10.2139/ssrn.2164784

Stephane Wolton (Contact Author)

London School of Economics & Political Science (LSE) - Department of Government ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

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