Optimal fiscal limits with overrides

• 成果类型: Article
• 署名作者: Coate, Stephen; Milton, Ross T.
• 署名单位: Cornell University; Kansas State University
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/j.jpubeco.2019.04.001
• 发表日期: 2019
• 页码: 76-92
• 关键词: Political economy; Tax limits; fiscal policy

摘要

This paper studies optimal fiscal limits in the context of a simple political economy model. A politician chooses the level of taxation for a representative citizen but is biased in favor of higher taxes. A constitutional designer sets a tax limit before the citizen's preferred level of taxation is fully known. The politician is allowed to override the limit with the citizen's approval. The paper solves for the optimal limit and explains how it is impacted by the possibility of overrides. The paper also shows that the citizen's welfare can be enhanced if the designer imposes a limit on the politician's override proposals. (C) 2019 Elsevier B.V. All rights reserved.