During the last two centuries, taxation has not only increased dramatically in level and volume; its structure has also changed: from a heavy reliance on customs revenue in the early nineteenth century to a stronger emphasis on income taxation in the twentieth. A common explanation for this development is the spread of democracy, which supposedly increases redistribution and the size of government. This paper argues that the effect of democratization on taxation depends on the distribution of tax preferences in society. These preferences are not uniform: rural farmers prefer different policies than urban workers. Thus, the impact of democratization varies depending on the urbanization rate. The paper uses a novel dataset providing data on government tax revenue in thirty-one countries in Western Europe, the Americas, Australia, New Zealand, and Japan-from as far back as 1800 up to the present day-in order to evaluate the conditional impact of democratization on tax structure. The results show that democracy decreases property taxes in rural countries but instead increases income taxes and decreases excise and consumption taxes in more urbanized states. These results are robust to different estimation methods, a number of control variables, such as interstate warfare, and to alternative measurements of democracy. Dev (2018) 53:111-150 In 1850, the government share of the economy was not even 6 %; one hundred years later, it had almost tripled. Not only did the last 200 years see an enormous increase in tax revenue; the composition changed radically. 1 Tariffs went from being the most important source of tax revenue in 1880 to being almost insignificant a century later, while income tax became a major part of government revenues during the same period. KeywordsI argue that these radical shifts in tax structure can be explained by changes in political institutions and economic structures. Specifically, democratization has a substantial impact on taxation, but its effect depends on the preferences of the formerly disenfranchised, which differs between urban and rural sectors. By matching class interest with specific taxes, I posit that the effect of democracy is conditional on underlying political preferences. To my knowledge, no previous research on the topic uses data stretching over 200 years and across 31 nations. The results show that democracy decreases property taxes in rural countries and increases income taxes and decreases excise and consumption taxes in highly urbanized states.In the period 1800 onward, we not only observe an increase in the size of government, but also a change in the type of government. The number of democracies among the 31 countries in the sample studied in this paper grew from three in 1850 to 27 in 2000 (using the definition in Boix et al. (2012)). One influential theory points to the issue of inequality and argues that since democratization increases the influence of the poor, more redistribution should follow. Although this paper is less concerned with redistribution ...
Fiscal capacity is regularly linked to warfare and democratization. However, the majority of income taxes – a cornerstone of government finance – were introduced by non-democratic states in peacetime. This paper is concerned with how autocratic politics shape the adoption and expansion of income taxes. Political institutions help overcome a commitment problem related to investments in taxation. To avoid being deposed by his or her elite supporters, a ruler needs to guarantee that new taxes will not be used opportunistically (e.g. expropriating the elite). If the elite supporters can effectively monitor the government, any transgressions will be detected and punishable. Institutions such as legislatures solve this commitment problem when they allow oversight and monitoring over the executive branch. The empirical implications are straightforward: in places with strong institutional oversight, which allows the elite to monitor the executive, we should observe higher fiscal capacity. I find support for this by analyzing newly available historical datasets over tax revenues, tax introduction dates, and political institutions.
Recent research claims that the link between partisanship and policy is weak and that left-wing governments tax the poor surprisingly heavily. In this article, I argue that left-wing taxation depends on the institutional context, not constraints from unions or overall spending. Using novel data, I demonstrate that the left tax more regressively in countries using proportional electoral systems, and more progressively in majoritarian countries. The political mechanism is evaluated in a comparison of Swedish and British tax policy after WWII. Uncertainty over future influence made the left in Britain wary of consumption tax, while the left in Sweden combined consumption tax with expanded social programs. Political risk shaped the strategies of key actors and helps explain the divergence in tax policy during this period.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.
hi@scite.ai
10624 S. Eastern Ave., Ste. A-614
Henderson, NV 89052, USA
Copyright © 2024 scite LLC. All rights reserved.
Made with 💙 for researchers
Part of the Research Solutions Family.