Politically Feasible Reforms of Non-Linear Tax Systems

78 Pages Posted: 24 Jul 2018

See all articles by Felix Bierbrauer

Felix Bierbrauer

University of Cologne - Center for Macroeconomic Research (CMR)

Pierre Boyer

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

Date Written: July 2018

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 system 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 politically feasible and/or welfare-improving.

Keywords: Non-linear income taxation, optimal taxation, political economy, Tax Reforms

JEL Classification: C72, D72, D82, H21

Suggested Citation

Bierbrauer, Felix and Boyer, Pierre C., Politically Feasible Reforms of Non-Linear Tax Systems (July 2018). CEPR Discussion Paper No. DP13059, Available at SSRN: https://ssrn.com/abstract=3218383

Felix Bierbrauer (Contact Author)

University of Cologne - Center for Macroeconomic Research (CMR) ( email )

Cologne
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

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