Is a State Really a Leviathan? Testing the Model of Buchanan and Brennan in Europe

This article is an attempt to synthetically present and test the main conclusions of the State-as-Leviathan model which was developed in a classical text The Power to Tax. Analytical Foundations of Fiscal Constitution (Buchanan, Brennan 1980). In the first part the main assumptions of the model are described. In the second one the model is developed further in order to present main research hypotheses. In the third part the critique and remarks on the model are reviewed. Fourth part is devoted to developing an empirical model and presenting the main findings of the analysis. Summary concludes the text with some suggestions for future research. The conducted analysis allows to draw conclusions pointing at less-than-perfect ability of the Leviathan model to describe real events in the fiscal policy and taxation area and in some instances seems to corroborate the conclusions ascribed to the “orthodox” theory of public finance criticized by Buchanan and Brennan. Regression model built upon a database on selected EU countries derived from the Eurostat, European Commission and European Social Survey points to the fact that indeed the broadness of the taxable base can positively influence public revenue . And it also negatively affects the way people perceive the national government (in line with model assumptions). But when we turn to the influence of the broadness of the base on the perceived quality of life we can find out that in the countries with a relatively broad base, peoples perceived life satisfaction is significantly higher (in line with “orthodox” theories). At the same time the analysis to some extent corroborates the Leviathan model suggestions that progressive taxation is beneficial for the citizens in comparison to proportional, as some recent research shows (Oishi et al. 2012)