Tax Structure and Public Spending ‐ Or How the Electorate Is Deceived into Paying for Bigger Public Spending than It Really Wants

In: Scandinavian political studies, Band 9, Heft 4, S. 317-336

Abstract

It is a classical proposition that tax structure may influence public spending. Two such propositions concerning the visibility and the elasticity of the tax system are tested. Visibility is not important while highly elastic tax systems are correlated with big public spending in times of economic boom. In times of economic decline and recession, high spending countries turn to deficit financing. In both cases big spenders seem to rely more upon a dose of fiscal illusion than moderate spenders.