Taxation and presidential approval: separate effects from tax burden and tax structure turbulence?

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Previous research has established that taxation may entail significant electoral costs to politicians. This literature, however, focuses exclusively on the effect of the tax burden. In this paper, we test the hypothesis that both the level of the tax burden and the change in the tax structure affect the US president's approval ratings (over the period . Our results support this proposition. Specifically, we find a negative impact from the levels of the tax burden and the deficit as well as from changes in the tax structure on presidential approval ratings. Terms of use: Documents in EconStor may IntroductionTaxation -and, more generally, revenue generation -by the government is necessary for the provision of public goods. Still, although we like to benefit from publicly provided goods, none of us enjoys paying the taxes to finance them. Politicians are also likely to have an ambiguous relation with taxation. They might well support extra revenues as it helps them to achieve their aims (be those providing public goods or rent-seeking), but generally shun the political costs inherently associated with these revenues. The existence of such political costs of taxation has been analysed through vote and popularity functions (VP-functions). This literature generally supports the idea that increases in tax revenues have a negative effect on a politician's popularity and re-election odds (e.g. Niskanen, 1979;Besley and Case, 1995).While identifying taxation as an important determinant of election outcomes and approval ratings, the literature on VP-functions disregards the possible effects of tax structure reforms. Nonetheless, in his seminal work on the politics of taxation, Rose (1985) argues that the popularity and re-election odds of incumbents are maximised, ceteris paribus, under a stable and unchanging tax system (see also Rose and Karran, 1987). The underlying argument is that tax changes have non-negligible fixed costs, irrespective of whether taxes are increased or lowered. These costs arise because the political rewards from those who benefit from tax structure changes are likely to be lower than the electoral punishment by those who lose in the reform. Indeed, individuals generally dislike losses more than they appreciate gains (cfr. the grievance asymmetry, Mueller, 1970). Also, when tax reform takes place the electorate's 2 attention is drawn to the least popular side of the government, i.e. the (high) tax burden (Peters, 1991).Ashworth and Heyndel...

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