Seminarios

Abstract

Using a voting-agency model with heterogeneous voters and different tax schedules, we analyze whether an increment in income taxes—understood as an increment in either marginal tax rates, or tax progressivity—positively affects voters' political demands for public goods (PG), and, consequently, its provision; and the incumbent's efforts. We show that this outcome can be only observed under particular circumstances. Results depend on the combination of three factors: (1) how the median voter's disposable income changes as taxes increase (income levels matter); (2) whether rich voters' political demands for PG are larger or smaller than respective poor voters' demands, and; (3) how total tax revenues change as taxes increase. Notably, whether (2) and (3) play an active role or not depends on the threat that voters face when the incumbent decides to forgo re-elections. We relate this threat with the level of development. We also show that an increment in the provision of PG generated by an increment in taxes does not necessarily imply an increment in incumbent's efforts.