“Employer Organization and Revenue Systems”

Coordinated nations with large welfare states have comparatively regressive tax systems (higher consumption taxes, broader income tax bases, lower capital taxes); whereas liberal countries with small welfare states are the opposite on each dimension.  Scholars attribute this to the needs of expansive welfare states for robust, broad-based, revenue-raising systems (Kato; Rueda and Beramendi; Prasad and Deng; Ganghof).  Yet the coalitional bases for the expansion of both welfare and revenue systems merit further investigation. 

We suggest that support of employers and right parties in revenue development contributed significantly to distributive variations.  Robust encompassing employers’ organizations encourage employers to consent to large revenue systems (in part, to protect large productivity-oriented welfare states), and enable business to shift the tax burden away from capital and onto labor (See Martin and Swank 2004, 2012 on support for spending).  Our quantitative analyses find employer organization to be a significant determinant of the distribution of the tax burden, well in advance of the value-added tax and other post-war initiatives.  Early employer coordination is a significant determinant of top marginal rates, consumption taxes as percent of total revenue and percent of corporate taxation among industrial democracies.  In depth case comparisons of class-consensus decision-making in Denmark versus class-conflict processes in the United States further document the dramatically different logics of taxation in coordinated and liberal countries and the role of corporate preferences, informed by encompassing business organizations, in the evolution of these diverse approaches (See also Johansen, Brownlee, and Prasad).