How Leviathan Taxes |
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Authors: | Klaus Beckmann Elisabeth Lackner-Frey |
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Affiliation: | (1) Department for Public Economics, Philipps-University Marburg, Am Plan 2, 35037 Marburg, Germany |
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Abstract: | The Leviathan hypothesis remains a cornerstone of constitutional tax theory. Following Brennan and Buchanan's (1980) seminal contribution, the power to tax is often likened to a monopoly, and its use by a revenue-maximising government is said to obey the rules of optimal taxation theory. We revisit, and refine, this position, explaining its underpinnings and discussing the Leviathan solution in several well-known optimal taxation models. It turns out that the power to tax is not a perfect analogue of ordinary monopoly power and that the similarity between Leviathan and optimal taxation solutions hinges on the irrelevance of distributional weights. |
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