Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 529: Voting over tax schedules in the presence of tax avoidance

Jesper Roine ()
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Jesper Roine: Dept. of Economic Statistics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden

Abstract: This paper reconsiders the classical problem of majority voting over tax schedules, adding the possibility to avoid taxes. In this setting preferences over tax schedules are not determined by earned income, but rather by taxable income, which depends on the joint decisions of labor supply and tax avoidance investments. The ordering of earned- and taxable income are shown to be the same if the tax avoidance function is log concave.

Keywords: Tax avoidance; Majority voting; Order-restricted preferences; Single-crossing condition

JEL-codes: C62; D70; H20

12 pages, May 27, 2003

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