The Political Costs of Taxes and Government Spending

The marginal political costs of different types of taxes and government spending, as well as voter preferences over different fiscal variables, are examined using two different specifications for political cost--one based on the probability of incumbent defeat and the other based on the incumbent's percentage of the vote. Models associated with these two specifications, in which voting behavior depends on disaggregated taxes and government expenditures, are estimated using data from Canadian provincial elections. The empirical results, which indicate that different types of taxes and expenditures have quite different marginal political costs, have important implications for models that incorporate voter preferences.