Public goods provision and redistributive taxation ¬リニ
نویسنده
چکیده
This paper studies the relationship between redistributive taxation and tax-deductible charitable contributions. Redistribution has two opposite effects on voluntary giving. The price of charitable giving decreases with the degree of redistribution, and this has a positive effect on the total amount of giving (substitution effect). However, redistribution leads to lower consumption for the contributors and therefore has a negative effect on contributions to the charity (income effect). The theoretical model developed in this paper demonstrates that, under a general class of utility functions, the substitution effect dominates the income effect. Hence, charitable giving increases with the tax rate. In purely egalitarian societies, the public good is provided efficiently and the total welfare is maximized independent of the ex-ante income inequality. However, the positive impact of taxation on charitable giving and welfare may disappear if individuals generate their income levels in anticipation of taxation and redistribution does not take into account the cost of effort. ∗I am grateful to Debraj Ray, Andrew Schotter, Alessandro Lizzeri, and William Easterly for their constant support throughout the project. I thank Pierre Pestieau and two anonymous referees for their extensive comments. I also thank Pinar Derin, Joan Esteban, Kfir Eliaz, Kyle Hyndman, Yusufcan Masatlioglu, Efe Ok, Jean-Benoit G. Rousseau, Doug Smith, seminar participants in 17th International Conference on Game Theory, Economic Science Association 2006 meetings, New York University, Michigan State University and Cleveland State University for helpful comments. †Research Center for Group Dynamics, ISR, Michigan University, E-mail: [email protected]. 1
منابع مشابه
Democracy, redistributive taxation and the private provision of public goods
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