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Tax reform and the political economy of the tax base

Ilzetzki, Ethan (2018) Tax reform and the political economy of the tax base. Journal of Public Economics, 164. pp. 197-210. ISSN 0047-2727

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Identification Number: 10.1016/j.jpubeco.2018.06.005


This paper studies the political prospects for reform in a model where the tax base and statutory rate are separate instruments of tax policy. The model suggests that large changes in the tax code may be easier to enact than marginal reforms. The tax base faces a tipping point where even the beneficiaries from tax exemptions support reform. At this tipping point, tax reform is Pareto improving. Politically feasible tax reform occurs when fiscal needs are large, but may nonetheless involve reductions in marginal tax rates. There is strategic complementary in lobbying for tax exemptions, resulting in multiple equilibria. The model’s main predictions are consistent with recent tax reforms in OECD countries.

Item Type: Article
Official URL:
Additional Information: © 2018 Elsevier B.V.
Divisions: Economics
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
JEL classification: D - Microeconomics > D7 - Analysis of Collective Decision-Making > D72 - Economic Models of Political Processes: Rent-Seeking, Elections, Legislatures, and Voting Behavior
D - Microeconomics > D7 - Analysis of Collective Decision-Making > D78 - Positive Analysis of Policy-Making and Implementation
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H26 - Tax Evasion
Date Deposited: 05 Jun 2018 13:47
Last Modified: 20 Oct 2021 03:08

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