This paper considers a political contest model wherein self-interested
politicians seek rents from the public budget, while general voters make political
efforts to protest against politicians' rent seeking directly (for example, through
voting in referendums such as the passage of Proposition 13) or indirectly (for
example, through donating money to organized groups such as the National
Taxpayer Union). We show that the political contest may ironically lead to the
Laffer paradox; that is, rent-seeking politicians may intend to set the tax rate
higher than the revenue-maximizing rate. For taming Leviathans, political protests
may not be as effective as competition among governments.
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