On the political economics of tax reforms

Arbeitspapier

There is often a gap between the prescriptions of an optimal tax system and actual tax systems, some of which can be neither efficient economically nor efficient at redistributing income. With a focus on personal income taxes, this paper reviews the political economics literature on tax systems and reforms to see whether political mechanisms allow us to better understand why tax systems look the way they look. Finally, we exploit a database of reforms in labour taxation in the European Union to check the determinants of all reforms, on the one hand, and of targeted reforms, on the other hand. The results fit well with political economy theories and show that political variables carry more weight in triggering reforms than economic variables. This shed light on whether and how tax reforms are achievable. It also explains why many reforms that seem economically optimal fail to be implemented.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 3538

Classification and Topics

• Classification: Wirtschaft ; Structure, Scope, and Performance of Government ; Taxation and Subsidies: Efficiency; Optimal Taxation ; Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes ; Capitalist Systems: Political Economy
• Subject: political economy ; taxation ; personal income tax ; Einkommensteuer ; Steuersystem ; Public Choice ; Lohnsteuer ; Steuerreform ; EU-Staaten

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Castanheira, Micael ; Nicodème, Gaëtan ; Profeta, Paola
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/49488
• Last update: 10.03.2025, 11:43 AM CET