Feasible taxation in advanced democracies (original) (raw)
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A Theory of Feasible Taxation in Advanced Democracies
2015
Tax pressure is usually considered the result of the policymakers’ efforts to maximise public expenditure, possibly by resorting to populism in order to alleviate tensions among the taxpayers. This paper offers a different and more articulated approach, following which populism is exogenous in the short run, but may change in the long run; taxpayers are sensitive to the quality of public expenditure; and policymakers try to find a compromise between their desire to engage in rent-seeking and their electoral ambitions. This paper shows under which circumstances compromise is obtained, how tensions arise, and illustrates the categories of outcomes that the taxpayers’ reactions may generate.
Politics and the Normative Analysis of Taxation
Taxation has been a much-discussed subject in the literature on economics and in writings on the role and meaning of the state. Over the centuries, many authors have put forward views of what qualifies as "good" taxation and what constitutes undesirable tax policy. Consensus on these issues has changed over time, depending on historical circumstances and prevailing modes of economic thinking.
The Political Economy of Taxation: Power, Structure, Redistribution
Social Science Research Network, 2016
In this chapter I provide an overview of the political economy of taxation in democratic states by considering the three most important issues in the field: (1) the evolution of the power to tax in (what are now) the mature constitutional democracies; (2) the nature and determinants of modern tax structures; and (3) redistribution in pluralistic societies over various horizons and in the face of economic shocks. The discussion considers the ideas and models that have arisen as scholars have grappled with these related issues, and points to some of the outstanding problems that may be worth pursuing in future research.
2006
Governments that wish to redistribute through budgetary policy do so mostly on the spending side, not on the taxation side of the budget. The taxation side is nevertheless important, partly because less efficient tax structures seem to be associated with lower taxation and spending levels. Hence political conflicts over spending levels may partly be fought as conflicts over tax structure. The paper provides a coherent perspective on the politics of tax structure. Specific topics include the (ir-)relevance of tax mixes, policy change in income taxation, the importance of tax competition, and the role of political institutions. -- Wenn der staatliche Haushalt zur Umverteilung genutzt wird, so geschieht dies vor allem auf der Ausgabenseite und nicht auf der Einnahmenseite. Die Einnahmeseite ist trotzdem bedeutsam, weil es offenbar einen Zusammenhang gibt zwischen der Effizienz der Steuerstruktur und dem Steuerniveau. Daraus folgt, dass politische Auseinandersetzungen über Ausgabennivea...
Political Regimes, Institutions, and the Nature of Tax Systems
The Elgar Guide to Tax Systems, 2011
1 In addition to the challenge of explaining why contemporary tax structures vary across space and time, which is our concern in this paper, other major questions in the political economy of taxation include: (i) what determines the power to tax? (ii) how and why do observed tax structures differ from optimal tax systems? and (iii) how can we understand the process of tax reform? For recent contributions concerning (i), see Besley and Persson (2009) and North, Wallis and Weingast (2009). On (ii) see, for example, some of the background papers and comments for the Commission on Reforming the Tax System (the Mirrlees Review); On (iii) see, and Hettich and Winer (1999, chap. 6) and the references therein.
Tax policy and tax protest in 20 rich democracies, 1980-2010
The British Journal of Sociology, 2017
It may be that all taxes have the potential to provoke social unrest. Some taxes, however, seem to provoke more unrest than others, and the questions of which taxes and why have long preoccupied practitioners of statecraft. The Chancellor of the Exchequer Robert Walpole is said to have remarked in the early eighteenth century that the payers of direct taxes were "pigs that squealed if they were touched," while the payers of indirect taxes-including, in the England of his day, tariffs, excises, and customs duties-were "sheep that let themselves be sheared in silence" (Barker 1966: 57). At least since the nineteenth century, many scholars who have pondered these questions have agreed with Walpole that direct taxes on income and wealth are most likely to provoke collective resistance, because their burdens are most easily perceived. And many would-be economic advisers have therefore counseled reliance on so-called indirect taxes on trade, such as excises, customs duties, and tariffs, because of what John Stuart Mill called "the easy manner in which the public consent to let themselves be fleeced in the prices of commodities" (2004 [1871]: bk. V, ch. 6, sec. 1). We undertake here to test this very old theory with new data on aggregate protest behavior in 20 rich democracies since 1980. We find that there are indeed systematic differences among taxes in their propensity to provoke protest, but that the conventional wisdom is wrong about which taxes provoke protest and why. The most protested taxes are those that impose concentrated costs on a well-defined social group in exchange for diffuse benefits, while the least protested are diffuse taxes that confer entitlement to benefits on a well-defined group. It is the relative concentration of costs and benefits, rather than the direct or indirect character of the taxes at issue, that best explains why some taxes are more protest-prone than others. These findings have important implications for the comparative political economy of the welfare state. A substantial literature in comparative political economy addresses the puzzle of
Populism, profligacy, and redistribution
The macroeconomics of populism in Latin America, 1991
Recent bouts of economic instability, originating in overexpansion and ending in hyperinflation, led economists to describe regimes in power during the past decade in Latin America as populist. Certainly Sarney, Alfonsin, Garcia and the Sandinistas have overseen inflation caused by budget deficits and balance-of-payments crises. The macroeconomic imbalances of these governments show strong similarities with the economic record of Peron, Vargas, and Goulart, three leaders traditionally identified as populists. Yet one should think twice about generalizing the term. Although recent regimes have failed to rein in budget deficits, the economic strategies they pursued and their underlying motivations display considerable heterogeneity and are quite distinct from past populism. This paper discusses these differences. Why debate terminology? There are lessons that recent leaders should have learned from traditional populists. The most basic is that failure to adjust to constraints imposed by the balance of payments and the internal productive capacity will lead to inflation and disaster (Harberger 1970). Yet, the early warning signs, evident in rhetoric and specific policies, have varied widely. If we broadly identify the disease and lump, ex post, all inflationary failures into the category of populism, we will not understand ex ante the development of crises and avert them. Moreover, because populism is associated with redistribution (although not toward the poorest), it is important to clarify when and why redistribution can lead to inflation. We begin by describing classical populism, as it has been viewed by Latin Eliana Cardoso is associate professor of international economic relations at the Fletcher School of Law and Diplomacy, Tufts University, and faculty research fellow of the National Bureau of Economic Research. Ann Helwege is assistant professor at the Urban and Environmental Policy Department, Tufts University. 1. Frozen assets will yield monetary correction and 6 percent interest per year. Starting September 1991, the government will return funds in 12-month installments.
Democracy’s Invisible Savior: Why Citizens Should Welcome Taxes with Open Arms
Advances in Politics and Economics
This article aims to understand the transformative power that the fiscal requirement to impose taxation has on democratization. An exploration into the fiscal development of early modern Europe alongside modern empirical examples, demonstrates the value of taxation as a solution to leaderships that don’t represent their people. It’s reasoned that the confluence of taxation and democracy can be attributed to two distinct mechanisms. One, that the government is more willing to compromise to the peoples’ demands, and two, that the people are more willing to demand this compromise. The latter is of particular significance in suggesting the role that behavioral phenomena play in inflaming democratic engagement. Critically, the behavioral effects of taxation should take more of a leading role in policies that pursue democratization whilst aid, more of a support role.
2002
Does democracy affect taxation? Do varieties of democratic institutions affect levels of revenue, methods of collection, and distributions of tax burdens? Many political scientists believe so despite the currently mixed evidence. Moreover, prominent models of fiscal politics yield differing predictions about whether and how elections, parties, constitutions, and legislative and executive decision rules influence policy choices. This essay reviews recent works on taxation under democracy with a focus on how scholars derive hypotheses about institutional effects. It evaluates the leading theories’ main assumptions and implications, including the results of empirical tests so far. Many explanations focus mainly on electoral competition or on post-electoral governing, but not both, and draw their evidence from a small set of countries. Promising works develop more complete models of decision making, test hypotheses against a broader range of countries’ experiences, and point toward more persuasive answers to current research questions.
Representation with Regressive Taxation: State Revenue Production and Democratization Revisited
The literature maintains that in the history of mature democracies, a progressive income tax evolved with a demand for equality, as reflected in the phrase "no taxation without representation." Starting in the mid-1970s, international economic pressure led to the introduction of regressive consumption taxes in countries that have been democratizing and are yet to democratize. However, little attention has been paid to the emerging link between regressive taxation and representation. Redistributive politics is a critical intervening factor. Although elites accept modern taxation without fearing redistribution, with its regressive effect, citizens increase their demand for equality. We conduct a quantitative analysis of 160 countries from 1960 to 2008 and confirm a positive effect of regressive taxes on democratization. We also find that economic growth alleviates the negative effect of tax inequality on democratization. This study illuminates the new tax-democratization lin...