Public Choice

, Volume 140, Issue 1–2, pp 43–58 | Cite as

Voting over taxes: the case of tax evasion

  • Christian Traxler
Open Access


This paper studies majority voting on taxes when tax evasion is possible. We characterize the voting equilibrium where the agent with median taxed income is pivotal. Since the ranking of true incomes does not necessarily correspond to the ranking of taxed incomes, the decisive voter can differ from the median income receiver. In this case, we find unconventional patterns of redistribution, e.g., from the middle class to the poor and the rich.


Majority voting Tax evasion Redistribution 

JEL Classification

H26 D72 


  1. Ahrend, R., & Winograd, C. (2006). The political economy of mass privatisation and imperfect taxation: winners and loosers. Public Choice, 126(1), 201–224. CrossRefGoogle Scholar
  2. Ahrend, R., Verdier, T., & Winograd, C. (2007). The political economy of inflation, demonetisation, and redistribution. Why and when monetary disorder ends? Mimeo, DELTA–Ecole Normale Superieure. Google Scholar
  3. Allingham, M., & Sandmo, A. (1972). Income tax evasion: a theoretical analysis. Journal of Public Economics, 1, 323–338. CrossRefGoogle Scholar
  4. Andreoni, J., Erard, B., & Feinstein, J. (1998). Tax compliance. Journal of Economic Literature, 36, 818–860. Google Scholar
  5. Barbaro, S., & Südekum, J. (2009). Voting on income-tax exemptions. Public Choice, 138(1), 239–253. CrossRefGoogle Scholar
  6. Bergström, F., & Gidehag, R. (2003). Sweden’s black economy. Axess, 8–2003. Google Scholar
  7. Bloomquist, K. M. (2003). Tax evasion, income inequality and opportunity costs of compliance. Proceedings of the National Tax Association, 96th Annual Conference, Chicago. Google Scholar
  8. Borck, R. (2009). Voting on redistribution with tax evasion. Social Choice and Welfare, 32, 439–452. CrossRefGoogle Scholar
  9. Cowell, F. A. (1990). Tax sheltering and the cost of evasion. Oxford Economic Papers, 42(1), 231–243. Google Scholar
  10. Cox, D. (1984). Raising revenue in the underground economy. National Tax Journal, 37(3), 283–288. Google Scholar
  11. Cremer, H., & Gahvari, F. (1993). Tax evasion and optimal commodity taxation. Journal of Public Economics 50, 261–275. CrossRefGoogle Scholar
  12. Engström, P., & Holmlund, B. (2006). Tax evasion and self-employment in a high-tax country: evidence from Sweden. CESifo Working Paper No. 1736. Google Scholar
  13. Epple, D., & Romano, R. E. (1996). Ends against the middle: determining public service provision when there are private alternatives. Journal of Public Economics, 62, 297–325. CrossRefGoogle Scholar
  14. Feldstein, M. (1995). The effect of marginal tax rates on taxable income: a panel study of the 1986 tax reform act. Journal of Political Economy, 103(3), 551–572. CrossRefGoogle Scholar
  15. Fiorio, C., & D’Amuri, F. (2005). Workers’ tax evasion in Italy. Bocconi University, Giornale degli Economisti, 64(2–3), 247–270. Google Scholar
  16. Fratanduono, R. J. (1986). Trends in voluntary compliance of taxpayers filing individual tax returns. In IRS Research Division (Ed.), Trend analyses and related statistics: 1986 (IRS Document 6011), Washington. Google Scholar
  17. Frey, B. S., & Feld, L. (2002). Deterrence and morale in taxation: an empirical analysis. CESifo Working Paper No. 760. Google Scholar
  18. Gans, J. S., & Smart, M. (1996). Majority voting with single-crossing preferences. Journal of Public Economics, 59(2), 219–237. CrossRefGoogle Scholar
  19. Gërxhani, K. (2004). The informal sector in developed and less developed countries: a literature survey. Public Choice, 120(3–4), 267–300. CrossRefGoogle Scholar
  20. Goolsbee, A. (2000). What happens when you tax the rich? Evidence from executive compensation. Journal of Political Economy, 108(2), 352–378. CrossRefGoogle Scholar
  21. Gouveia, M. (1997). Majority rule and the public provision of a private good. Public Choice, 93(3–4), 221–244. CrossRefGoogle Scholar
  22. Gruber, J., & Saez, E. (2002). The elasticity of taxable income: evidence and implications. Journal of Public Economics, 84(1), 1–32. CrossRefGoogle Scholar
  23. Kopczuk, W. (2001). Redistribution when avoidance behavior is heterogeneous. Journal of Public Economics, 81(1), 51–71. CrossRefGoogle Scholar
  24. Lemieux, T., Fortin, B., & Frechette, P. (1994). The effect of taxes on labor supply in the underground economy. American Economic Review, 84(1), 231–254. Google Scholar
  25. Meltzer, A. H., & Richard, S. F. (1981). A rational theory of the size of government. Journal of Political Economy, 89, 914–927. CrossRefGoogle Scholar
  26. Mogensen, G. V. (2004). Skattesnyderiet og indkomstfordelingen. In Skat (Ed.), Skat–April 2004, Skatteministeriet, Kobenhavn. Available online at (last accessed 01 Feb. 2009)
  27. Persson, T., & Tabellini, G. (2000). Political economics: explaining economic policy. Cambridge: MIT. Google Scholar
  28. Roberts, K. (1977). Voting over income tax schedules. Journal of Public Economics, 8, 329–340. CrossRefGoogle Scholar
  29. Roine, J. (2003). Voting over tax schedules in the presence of tax avoidance. SSE/EFI Working Paper 529, Stockholm University. Google Scholar
  30. Roine, J. (2006). The political economy of not paying taxes. Public Choice, 126(1–2), 107–134. CrossRefGoogle Scholar
  31. Romer, T. (1975). Individual welfare, majority voting and the properties of a linear income tax. Journal of Public Economics, 4, 163–185. CrossRefGoogle Scholar
  32. Roth, J. A., Scholz, J. T., & Witte, A. D. (1989). Taxpayer compliance, Vol. 1: An agenda for research. Philadelphia: University of Pennsylvania Press. Google Scholar
  33. Slemrod, J. (1994). On the high income laffer curve. In J. Slemrod (Ed.), Tax progressivity and income inequality. Cambridge: Cambridge University Press. Google Scholar
  34. Slemrod, J. (2001). A general model of the behavioral response to taxation. International Tax and Public Finance, 8(2), 119–128. CrossRefGoogle Scholar
  35. Slemrod, J. (2007). Cheating ourselves: the economics of tax evasion. Journal of Economic Perspectives, 21(1), 25–48. CrossRefGoogle Scholar
  36. Stöwhase, S., & Traxler, C. (2005). Tax evasion and auditing in a federal economy. International Tax and Public Finance, 12(4), 515–531. CrossRefGoogle Scholar
  37. Tedds, L. (2008). Estimating the income reporting function for the self-employed. Mimeo, University of Victoria. Google Scholar
  38. Traxler, C. (2006). Voting over taxes: the case of tax evasion. Discussion Papers in Economics 1188, University of Munich, Department of Economics. Google Scholar
  39. Yitzhaki, S. (1974). A note on income tax evasion: a theoretical analysis. Journal of Public Economics, 3, 201–202. CrossRefGoogle Scholar
  40. Young, M., Reksulak, M., & Shughart, W. F. (2001). The political economy of the IRS. Economics and Politics, 13(2), 201–220. CrossRefGoogle Scholar

Copyright information

© The Author(s) 2009

Authors and Affiliations

  1. 1.Max Planck Institute for Research on Collective GoodsBonnGermany

Personalised recommendations