Scandinavian Working Papers in Economics

Research Papers in Economics,
Stockholm University, Department of Economics

No 2000:1: Tax Avoidance, Redistribution and Voting

Jesper Roine ()
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Jesper Roine: Dept. of Economics, Stockholm University, Postal: Department of Economics, Stockholm University, S-106 91 Stockholm, Sweden

Abstract: The main question addressed in this paper is how the possibility of investing in tax avoidance affects voting and redistributive outcomes in an economy where the tax rate is determined by a majority vote and taxes go to lump-sum redistribution. The outcome depends on the timing and efficiency of tax avoidance. It is shown that in all cases those who invest in tax avoidance pay proportionally less in taxes than others. Politically two cases can be distinguished. One where the population is divided accordingly to income and the median income earner is decisive, and one where the most affluent form a coalition with those with low income and the decisive voter has lower than median income.

Keywords: Tax Avoidance; Redistribution; Voting

JEL-codes: D72; H20; H23; H24

29 pages, November 27, 1999

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