Non-discriminatory donation relief and strategic commitment under political competition

Abstract

[eng] Tax relief for private donations towards the provision of collective goods can protect minorities from majority-driven outcomes in which tax revenues are exclusively used to finance the provision of public goods that are only valued by the majority. In this paper we show that non-discriminatory tax relief for private donations can arise in political equilibrium as a strategic commitment device aimed at creating and supporting political alliances that would not otherwise be able to coalesce.