One of the items that Congress added to the American Recovery and Reinvestment Act of 2009, President Obama’s stimulus package, was a first-time homebuyer tax credit. The tax credit gave people buying their first home, or who had not been homeowners for at least three years, a tax credit equal...

This paper studies investment decisions by economic agents in cases where the tax rate is decided through voting. It will be shown that, in some cases, only a Pareto-dominated tax policy on the wrong side of the Laffer curve is supported under rational expectations. Thus, the governments may...