Politically feasible reforms of non-linear tax systems

Abstract

We study reforms of income tax systems from a political economy perspective. We present a median voter theorem for monotonic tax reforms, i.e. reforms so that the change in the tax burden is a monotonic function of income. We also provide an empirical analysis of tax reforms, with a focus on the US. We show that past tax reforms have, by and large, been monotonic. We also investigate whether past reforms in the US were in the median voter's interest. Finally, we develop sufficient statistics that enable a test whether a given tax system admits a politically feasible reform. (with Felix Bierbrauer and Andreas Peichl)