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A Political Economy of Income Tax Policies*

Published online by Cambridge University Press:  06 October 2015

Bruce Bueno de Mesquita ,
George Downs  and
Alastair Smith
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Abstract

Despite the close ties between tax-generated revenue and government policies, little is known about how political institutions shape the structure of tax choices across income levels. We propose and test a model based on the selectorate perspective, which predicts that leader choices regarding taxing and spending are driven by their desire to maximize their survival prospects against domestic challengers. The empirical tests investigate the conditions under which income taxes are non-existent, flat, more regressive or more progressive, and the degree of heterogeneity in tax systems as a function of governance institutions. The empirical results strongly and robustly support the theoretical predictions while also shedding light on how tax structures implemented in large coalition systems reduce income inequality.

Type
Original Articles
Information
Political Science Research and Methods , Volume 5 , Issue 1 , January 2017 , pp. 1 - 29
Copyright
© The European Political Science Association 2015 

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Footnotes

*

Professor Bruce Bueno de Mesquita, Department of Politics, New York University, 19 West 4th St. New York NY 10012, USA ([email protected]). Professor Alastair Smith, Department of Politics, New York University, 19 West 4th St. New York NY 10012, USA ([email protected]). Our colleague, friend, and co-author George W. Downs sadly passed away on January 21, 2015. He would have been very happy to see this paper in print as he was deeply concerned with understanding the sources of economic inequality and how they might be redressed through tax and governance policies. George was one of the pioneers in developing a rigorous understanding of the workings of international organizations, human rights promotion, and the politics of equal opportunity. He not only studied institutions, but also was instrumental in building them. As dean of social science at NYU, he helped to forge a strong commitment to political economy and to other rigorous approaches to understanding human behavior. He will be sorely missed. We are grateful to Michael Aklin, Barbara Franziska and James Hines for their assistance in tracking down and providing data. Our thanks also to Arturas Rozenas and Lyle Scruggs for their helpful comments and suggestions. Alastair Smith gratefully acknowledges the financial support of the Russell Sage Foundation.

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