Politically Feasible Reforms of Non-Linear Tax Systems

62 Pages Posted: 20 Aug 2017

See all articles by Felix J. Bierbrauer

Felix J. Bierbrauer

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods

Pierre Boyer

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

Date Written: July 25, 2017

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., Politically Feasible Reforms of Non-Linear Tax Systems (July 25, 2017). CESifo Working Paper Series No. 6573. Available at SSRN: https://ssrn.com/abstract=3021718

Felix J. Bierbrauer

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods ( email )

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

Pierre C. Boyer (Contact Author)

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

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