Voting on Redistribution with Retaining Top Talent

We consider majority voting over selfishly optimal nonlinear income tax schedules proposed by a continuum of individuals who differ in their privately observable skills. A tax schedule is feasible if it respects the participation constraint for the highest skill type (``top talent'') and the usual participation, incentive compatibility, and government budget constraints. We provide the conditions under which the median skill type's proposal is a Condorcet winner, which favors the median voter at the expense of both rich and poor. Perhaps surprisingly, the redistributive motive of the median voter will, ceteris paribus, be reinforced by tightening the usual participation constraint; however, it can be weakened by tightening the participation constraint for top talent. Compared with the case that ignores these participation constraints, adding them results in marginal tax rates that are higher in the lower part of the distribution but are lower in the upper part, therefore being less progressive