Representation through Taxation

Social scientists teach that politicians favor groups that are organized over those that are not. Representation Through Taxation challenges this conventional wisdom. Emphasizing that there are limits to what organized interests can credibly promise in return for favorable treatment Gehlbach shows that politicians may instead give preference to groups – organized or not – that by their nature happen to take actions that are politically valuable. Gehlbach develops this argument in the context of the postcommunist experience focusing on the incentive of politicians to promote sectors that are naturally more tax compliant regardless of their organization. In the former Soviet Union tax systems were structured around familiar revenue sources magnifying this incentive and helping to prejudice policy against new private enterprise. In Eastern Europe in contrast tax systems were created to cast the revenue net more widely encouraging politicians to provide the collective goods necessary for new firms to flourish.