اصلاح نظام مالیاتی پیچیده درآمد : دیدگاه اقتصاد سیاسی

In this paper we analyze the political economy of revenue-neutral income tax reforms when a government aims at cutting back deduction possibilities in exchange for lower tax rates (“tax-cut-cum-base-broadening”). We show that the individual decision whether to support or reject a reform proposal depends on how strongly the voter is affected by all available exemptions, even if the cut of only one single exemption is at stake. The voting outcome in the society depends on the joint distribution of the deductible characteristics. Due to implicit logrolling there are cases where only symmetrical tax reforms are possible, whereas for other properties of the joint distribution only asymmetric cuts of privileges are politically viable.

Many continental European countries have high income tax rates but extremely complicated rules about how to determine the individual tax base due to many parallel deduction possibilities (Elschner et al., 2003 and OECD, 2001). It is frequently argued that this is harmful for the economy because of high information costs for understanding all relevant tax laws (Aaron et al., 1999), and because of problematic distributive effects, as typically only the rich hire expensive advisors who know all available legal possibilities to save taxes (Pechman, 1987). Many economists, international organizations and policy commentators therefore prefer a simpler income tax system with fewer exemptions, a wider tax base and lower tax rates (e.g. OECD, 2001). Although some European countries have recently taken steps to implement structural reforms of their income tax systems in this direction, it seems fair to say that there is still a great reluctance to adopt a tax-cut-cum-base-broadening. Presumably this is so because of political constraints. In rhetoric there is a broad consensus among policy makers that a simplification of the tax system is desirable but the opposition of voters who are negatively affected by abolition of deduction possibilities is seen as a major obstacle in the reform process. It is therefore important to analyze the political economy of structural income tax reforms. This is the aim of this paper, which looks at reforms of a “complicated” income tax system, which we define as a system with more than one initial deduction possibility. The government wants to broaden the tax base in exchange for lower tax rates by cutting back or abolishing one, several or all available exemptions. Yet, any specific proposal must win the support of the majority of voters in order to be politically feasible. The main contribution of our analysis is to show how interdependence of tax exemptions influences the voting behavior of individuals and consequently voting outcomes in the society as a whole.

In this paper we have studied the political economy of revenue neutral reforms in a complicated income tax system. Compared to a simple system with only one exemption, some additional issues arise. The voting decision of an individual with respect to an asymmetric reform does not only depend on how much a person benefits from this particular deduction possibility. The decision always depends on all available deduction possibilities, since they determine the voter's tax base on which the post-reform tax rate is applied. A government that aims at a tax reform must therefore always take into account how the voting population is affected by all available deduction possibilities, even if it aims at cutting back only one single exemption. Many policy makers in reality do not seem to be aware of this, as the political chances of such a tax reform are usually assessed only by looking at how much the voters are affected from this particular tax privilege. Our model, which completely abstracts from lobbying or pressure group arguments, can neither be used to argue that symmetric reforms are always easier to implement than asymmetric ones, nor does it imply the opposite. Which reform strategies are politically viable depends on the joint distribution of the tax relevant characteristics across the voting population.