The Benefit Principal of Taxation and Tax Payers' Political Support

Based on the observation that political process IS the essence of the benefit principle of taxation proposed by Wicksell and Lindahl, this paper develops a formal model incorporating the modern political system on public policy. We assume that there is a policy maker who proposes tax/public goods combination and people show their political support according to their utility from the policy. This paper provides sufficient conditions under witch the benefit principle holds and efficient prOVISIOn is guaranteed in political determination of public goods. In addition, even along with the principle the level of public goods can be shown to be less than the social optimum when a tax on complementary private goods should be used due to information unavailability.