Tax Morale with Partisan Parties

This paper analyzes the political economy of income redistribution when voters are concerned about tax compliance We consider a two stage-model where there is a two party competition over the tax rate in the first stage and voters decide about their level of tax compliance in the second stage We model political competition a la Wittman with the ideology of parties endogenously determined at equilibrium We calibrate the model for an average of EU-27 countries Numerical simulations provide the tax rates proposed by the two parties and the level of tax compliance We find that a decrease in the perceived average level of tax compliance, increase the probability that the party offering the lowest income tax will win Moreover, the same result is obtained when parties' uncertainty about the preferences of the median voter increases