Politically Feasible Reforms of Non-Linear Tax Systems

114 Pages Posted: 16 Jun 2020

See all articles by Felix J. Bierbrauer

Felix J. Bierbrauer

Max Planck Institute for Research on Collective Goods

Pierre Boyer

Ecole Polytechnique, Palaiseau - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Andreas Peichl

CESifo (Center for Economic Studies and Ifo Institute)

Date Written: April 14, 2020

Abstract

We present a conceptual framework for the analysis of politically feasible tax reforms. First, we prove a median voter theorem for monotonic reforms of non-linear tax systems. This yields a characterization of reforms that are preferred by a majority of individuals over the status quo and hence politically feasible. Second, we show that every Pareto-efficient tax systems is such that moving towards lower tax rates for below-median incomes and towards higher rates for above median incomes is politically feasible. Third, we develop a method for diagnosing whether a given tax system admits reforms that are welfare-improving and/ or politically feasible.

Keywords: Non-Linear Income Taxation, Tax Reforms, Political Economy, Welfare Analysis

JEL Classification: C720, D720, D820, H210

Suggested Citation

Bierbrauer, Felix J. and Boyer, Pierre C. and Peichl, Andreas, Politically Feasible Reforms of Non-Linear Tax Systems (April 14, 2020). CESifo Working Paper Series No. 6573, Available at SSRN: https://ssrn.com/abstract=3021718

Felix J. Bierbrauer (Contact Author)

Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

Pierre C. Boyer

Ecole Polytechnique, Palaiseau - Department of Economics ( email )

Route de Saclay
Palaiseau, 91120
France

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Andreas Peichl

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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