On the Popular Support for Progressive Taxation
Posted: 8 Dec 2002
The popular support for progressive income taxation theorem (Maruhenda and Ortuno-Ortin, 1995) provides an important formalization of the intuition that a majority of relatively poor voters over rich ones leads to progressive income taxation. Yet, the theorem does not provide an equilibrium outcome, is obtained for an overly restrictive domain of tax schedules, and ignores incentive effects of income taxation. This paper shows that none of these assumptions of the theorem can be relaxed completely. I first provide a formal proof of the non-existence of a pure-strategy voting equilibrium. Then it is shown that a majority of poor voters does not necessarily imply progressive taxation, when the tax policy space is extended to include the class of all average-rate progressive tax schedules. Finally, I demonstrate that, even in a restricted domain of tax schedules, a linear tax schedule may obtain a majority over a progressive one when individuals' income is endogenous.
Keywords: Voting, Income Tax, Progressiveness, Endogenous Income
JEL Classification: D72
Suggested Citation: Suggested Citation