Voting over piece-wise linear tax methods

Abstract

We analyze the problem of choosing the most appropriate method for apportioning taxes in a democracy. We consider a simple model of taxation and restrict our attention to piece- wise linear tax methods, which are almost ubiquitous in advanced democracies worldwide. In spite of facing an impossibility result saying that if we allow agents to vote for any piece-wise linear tax method no equilibrium exists, we show that if we limit the domain of admissible methods in a meaningful way, albeit not restrictive, an equilibrium does exist. We also show that, for such a domain, a wide variety of methods can be supported in equilibrium. This last result provides rationale for some activities of special interest groups.voting, taxes, majority, single crossing, special interest politics