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Fairness, Self-Interest, and the Politics of the Progressive Income Tax

Kramer, Gerald H. and Snyder, James M., Jr. (1983) Fairness, Self-Interest, and the Politics of the Progressive Income Tax. Social Science Working Paper, 498. California Institute of Technology , Pasadena, CA. (Unpublished)

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All advanced democracies have adopted income taxes with considerable progression in marginal tax rates. To explain this we examine the nature of individual and collective preferences over alternative tax schedules, in the context of a simple two-sector model. We first consider the case of altruistic or "sociotropic" citizens who view the income tax as a means of achieving a fairer or more egalitarian distribution of income. We show that greater marginal-rate progressivity may well be less fair; that a "fairest" tax, however defined, is always a linear or "flat-rate" schedule in which all incomes are taxed at the same marginal rate; and that with a purely sociotropic electorate there exists a flat-rate schedule which is a majority equilibrium. We then show that with "self-interested" voters who seek to minimize their own tax burdens, greater marginal-rate progression may well be preferred by middle-and upper-income voters; that for middle-income citizens the optimal schedule is a sharply progressive one; and that within the set of individually optimal schedules there exists a majority equilibrium, which is a progressive schedule which minimizes the burden on median-income or middle class citizens, at the expense of lower-and upper-income taxpayers.

Item Type:Report or Paper (Working Paper)
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Additional Information:Published as Snyder, James M., and Gerald H. Kramer. "Fairness, self-interest, and the politics of the progressive income tax." Journal of Public economics 36.2 (1988): 197-230.
Group:Social Science Working Papers
Series Name:Social Science Working Paper
Issue or Number:498
Record Number:CaltechAUTHORS:20170921-135438907
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:81695
Deposited By: Jacquelyn Bussone
Deposited On:21 Sep 2017 21:20
Last Modified:03 Oct 2019 18:45

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