VOTING OVER FLAT TAXES IN AN ENDOWMENT ECONOMY

We assume a majority rule mechanism and examine how society trades off exemption levels and tax rates in a simple endowment economy using a flat tax. Contrary to the presumption in Foley (Yale Economic Essays, 1967, 7, 45-98), we find that preferences over these tax structures ar e not single peaked. However, we are able to prove existence and provi de a simple characterization of the majority rule equilibrium.