Wednesday, June 26, 2013
5.59 (PC Hoofthuis)
Why do nations hold such diverse views of taxes and the public sector? Contrary to convention wisdom, nations with less progressive tax systems have larger public sectors and those with more visible taxes enjoy higher levels of tax consent. I argue that processes giving employers access to policymaking shape the strategies by which they constrain progressivity. Paradoxically, strong, encompassing business (and labor) associations allow employers to shape tax systems in securing lower levels of capital taxation and less progressive rates, but the groups also restrain special concessions in tax expenditures to individual members. The early victories in containing both progressivity and tax expenditures, paradoxically, enhance employers’ support for a robust tax base and vibrant public space.
I evaluate the role of employers and industrial coordination in the architecture of tax regimes in two paradigmatic countries, Denmark and the United States, at two critical junctures: in the early 1900s with the origins of income tax systems, and in the 1960s, when both sought tax reforms to reduce progressive income taxes and to spur capital investment and competitiveness. The Danish tax initiatives were developed with the full support of actors across the spectrum; for example, employers and conservative parties entered into a productivity pact with other parties and labor to create the consumption tax. In the American debates, public finance was an arena of class and internecine warfare in a highly-politicized policymaking process.
I evaluate the role of employers and industrial coordination in the architecture of tax regimes in two paradigmatic countries, Denmark and the United States, at two critical junctures: in the early 1900s with the origins of income tax systems, and in the 1960s, when both sought tax reforms to reduce progressive income taxes and to spur capital investment and competitiveness. The Danish tax initiatives were developed with the full support of actors across the spectrum; for example, employers and conservative parties entered into a productivity pact with other parties and labor to create the consumption tax. In the American debates, public finance was an arena of class and internecine warfare in a highly-politicized policymaking process.
