By the same authors

Inequality and the composition of taxes

Research output: Working paperDiscussion paper

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Publication details

DatePublished - Mar 2015
PublisherDepartment of Economics and Related Studies, University of York
Number of pages36
Original languageEnglish

Publication series

NameUniversity of York Department of Economics Discussion Papers in Economics

Abstract

This paper analyzes the political economics of the composition of taxes. Taxes may be levied on income, or on expenditure, and the median voter is pivotal in the theoretical framework analyzed. As in Meltzer and Richard (1981) income taxes increase with inequality. Conversely expenditure taxes first increase and then decrease with increasing inequality. The extent to which taxes are levied on income relative to expenditure unambiguously rises with inequality. Cross-country data exhibit a robust positive correlation between the extent to which taxes are levied on income relative to expenditure, and inequality. Consistent with the theory this relationship holds most significantly in stronger democracies.

    Research areas

  • tax structure, inequality

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