Pareto Efficiency and Majority Voting: Why High Taxes on the Middle Class May Be Desirable.

In this paper we use a simple median voter model to analyze the effects of tax systems with differing degrees of progressivity. We find that relatively high taxes on middle incomes have two important advantages: on the one hand, they help to ensure that all citizens are better off than they would be in a world without government, and on the other hand, they reduce the tax level chosen in the election. Therefore, the progression in the middle-income range not only ensures that Wicksell's requirement of ex post efficiency of the tax system is achieved, it may also increase social welfare. Copyright 2000 by Kluwer Academic Publishers