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We introduce a model of redistributive income taxation and public expenditure. This joint treatment permits analyzing the interdependencies between the two policies: one cannot be chosen independently of the other. Empirical evidence reveals that partisan confrontation essentially falls on expenditure policies rather than on income taxation. We examine the case in which the expenditure policy (or the size of government) is chosen by majority voting and income taxation is consistently adjusted. This adjustment consists of designing the income tax schedule that, given the expenditure policy, achieves consensus among the population. The model determines the consensus in- come tax schedule, the composition of public expenditure and the size of government. The main results are that inequality is negatively related to the size of government and to the pro-rich bias in public expenditure, and positively or negatively related to the marginal income tax, depending on substitutability between government supplied and market goods. These implications are validated using OECD data.

The paper studies in a simple, Downsian model of political competition how the private provision of public goods is affected when it is embedded in a system of democracy and redistributive taxation. Results show that the positive effect of inequality on public goods production, which Olson (1965) pointed to, is weakened and might even be reversed in this context. Also, the median voter may choose a negative tax rate, even if he is poorer than the mean, in order to stimulate public goods production. The relevance of the model is illustrated with an application to the finance of higher education.

Paternalism, merit goods and specific egalitarianism are concepts we sometimes meet in the literature. The thing in common is that the policy maker does not fully respect the consumer sovereignty principle and design policies according to some other criterion than individuals' preferences. Using the self-selection approach to tax problems developed by Stiglitz (1982) and Stern (1982), the paper provides a characterization of the properties of an optimal redistributive mixed tax scheme in the general case when the government evaluates individuals' well-being using a different utility function than the one maximized by private agents.

Paternalism, merit goods and specific egalitarianism are concepts we sometimes meet in the literature. The thing in common is that the policy maker does not fully respect the consumer sovereignty principle and designs policies according to some other criterion than individuals? preferences. Using the self-selection approach to tax problems developed by Stiglitz (1982) and Stern (1982), the paper provides a characterization of the properties of an optimal redistributive mixed tax scheme in the general case when the government evaluates individuals? well-being using a different utility function than the one maximized by private agents.

Paternalism, merit goods and specific egalitarianism are concepts we sometimes meet in the literature. The thing in common is that the policy maker does not fully respect the consumer sovereignty principle and design policies according to some other criterion than individuals' preferences. Using the self-selection approach to tax problems devel- oped by Stiglitz (1982) and Stern (1982), the paper provides a char- acterization of the properties of an optimal redistributive mixed tax scheme in the general case when the government evaluates individuals' well-being using a different utility function than the one maximized by private agents.

The consideration of the distribution of income, wealth and consumption within countries around the globe reveals one basic and consistent picture: inequality in the allocation of resources is a prevailing global phenomenon and subject to an ongoing negative trend since, at least, the last three decades. In general, governments are equipped with a range of instruments and tools to influence distribution, with redistributive tax systems being considered the most direct, powerful and popular instrument in this context. Besides its influence on resource allocation, however, tax and transfer policies also possess substantial effects on many economic areas, for example, economic growth, financial markets and individual as well as aggregate welfare. Although widely discussed, the effects of taxation and redistribution as well as the underlying causes are not yet fully understood. By the means of economic equilibrium models the present work, therefore, addresses the influence of redistributive taxation within a closed economy populated by heterogeneous agents. The results show that rising tax rates on labor income or capital gains are generally associated with decreasing economic growth rates and, hence, diminishing future consumption possibilities. Moreover, in a variety of cases, redistributive taxation might foster inequality in wealth, consumption and participation rates. Even when effective, redistributive taxation is generally associated with a trade-off between macroeconomic growth and equality (or welfare).

The paper studies in a simple, Downsian model of political competition the private provision of public goods embedded in a system of democracy and redistributive taxation. Results show that the positive effect of inequality on production of public goods, to which Olson (1965) pointed, is weakened and might even be reversed in this context. Also, the median voter may choose a negative tax rate, even if he or she is poorer than the mean, in order to stimulate production of public goods. The relevance of the model is illustrated with an application to the financing of higher education. [Copyright Elsevier B.V.]