Tax rules |
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Authors: | Hans Gersbach Volker Hahn Stephan Imhof |
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Affiliation: | 1. Center of Economic Research–ETH Zurich (CER–ETH), 8032, Zurich, Switzerland 2. Department of Economics, University of Konstanz, 78457, Konstanz, Germany
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Abstract: | Tax schemes are more restricted by constitutional rules than subsidies. We introduce a model of public good provision with incentive problems in agenda-setting and identify several advantages of restrictions on tax schemes. In particular, tax rules may prevent the proposal and adoption of inefficient projects that benefit only a small minority. We also propose “redistribution efficiency” as a socially desirable property of proposals and find that tax rules guarantee this kind of efficiency. Moreover, a constitution that requires certain restrictions on both taxes and subsidies satisfies a criterion we label “robustness against counter-proposals.” We provide an axiomatic characterization of this constitution. Finally, we perform utilitarian welfare comparisons. |
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