Taxation and the development of fiscal capacity

 

The nondemocratic origin of fiscal taxation (with Didac Queralt). 2015. Comparative Political Studies. 48(14): 1974- 2009, (DOI: 10.1177/0010414015592646)

[Paper] [Online_Appendix]

[Discussion on LSE British Politics and Policy Blog]

This article examines the adoption of income taxes in Western economies since the 19th century. We identify two empirical regularities that challenge predictions of existing models of taxation and redistribution: While countries with low levels of electoral enfranchisement and high levels of landholding inequality adopt the income tax first, countries with more extensive electoral rules lag behind in adopting these new forms of taxation. We propose an explanation of income tax adoption that accounts for these empirical regularities. We discuss the most important economic consideration of politicians linked to owners of different factors, namely, the shift of the tax burden between sectors, and examine how preexisting electoral rules affect these political calculations. The article provides both a cross-national test of this argument and a microhistorical test that examines the economic and political determinants of support for the adoption of the income tax in 1842 in Britain. Keywords political economy, state building, nondemocratic regimes, politics of growth/ development, fiscal capacity Introduction The 20th century is the era of the Tax State

Fiscal Innovation in Non-Democratic Regimes: Examining the Adoption of Income Taxes in Imperial Germany (with Didac Queralt).

The income tax is a central pillar of the modern fiscal state due to its revenue-raising capacity and administrative sophistication. This paper investigates the economic and political factors that facilitated the adoption of this radically new technology of taxation. We show that income taxes were adopted first in non-democratic settings and that they were supported politically by parties representing the interests of landowners. Our paper proposes an explanation of these empirical regularities that identifies both the fiscal and political benefits reaped by oligarchic elites in non-democratic settings from the adoption of income taxes. We present multiple tests of our hypotheses, including an analysis of the variation in the timing of income tax adoption across the principalities of the German Empire prior to World War I, an analysis of the roll call vote that led to the adoption of the income tax in Prussia, and a variety of other microlevel tests that examine the favorable economic and political consequences of income tax adoption for Conservative politicians in non-democratic settings.