Voting on income tax exemptions

Most itemized tax exemptions lead to significant deductions for a minority of the population only. This raises the question why the majority does not vote for the abolition of these tax privileges in exchange for lower tax rates. In this paper we show that a reform proposal may be voted down, even when the majority uses the exemption at stake below the average. Turning to an empirical application, we simulate the voting outcome on the proposal to abolish the tax deductibility of commuting expenses in Germany. Our model predicts that this proposal would be rejected, even though a comfortable majority has below-average deductions.