Political economics of taxation

Abstract

Based on a survey of the literature on the political economics of taxation we analyze in this paper with data for Switzerland which tax instruments are less intensively used when tax policy is restricted by tax competition and direct democracy. Both institutions restrict government revenue according to our results. In particular, Swiss cantons finance their government activities less by broad-based taxes, like personal income taxes, than by user charges. Both institutions thus enforce a stronger government financing according to the benefit principle instead of the ability to pay principle. © 2012 die Autoren Perspektiven der Wirtschaftspolitik © 2012 Verein für Socialpolitik.