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Flat Tax Proposal

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A recent opinion poll shows the majority of respondents favor a flat tax of 20 percent on all income, subject to a $35,000 exemption. (The first $35,000 of income would be untaxed.) An independent politician adopts this flat-tax proposal. His opponent is a Democrat who favors increasing the top marginal tax rate to 42 percent. Based on the median voter model, which candidate is likely to win the election.

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STEP 1
According to the median voter model, the opinion held by the median voter will become the decision if the simple majority rule is followed. The median voter by definition is the voter that has the same number of voters on one side as on his other side. For this model to be operational it is necessary that the single peaked condition is satisfied.

STEP 2
In the problem that is given to use a flat tax of 20% above the exemption level of $35,000 is favored by the majority. Using the median voter model this means that the median voter also favors a flat tax of 20 percent on all income, subject to a $35,000 exemption. If we assume that there is a single peaked condition, we can reach the conclusion that the independent politician will win the elections.

The median voter model proposes that if there is majority rule, the opinion of the ...

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