How Policy Feedback and Political Instutions Shape Inheritance Tax Policy (Non-) Decisions

The rise in economic inequality in economically advanced democracies is primarily a result of a growing share of total income accruing to top earners and a simultaneous falling behind of tax systems’ ability to penetrate high incomes. This paper asks why significant tax policy decisions in contrast to conventional theoretical beliefs exacerbated rather than hampered economic inequality, and argue this to be a combined effect of policy feed-backs and institutional ramifications for political decision making procedures. We hypothesize first, that tax policy outcomes are more likely to advantage economic elites and contribute to growing economic inequality if policy-designs provide knowledgeable and often well-organized affluent groups incentives to mobilize, and if that happens where the political system is vulnerable to the organized effort of such groups. Second, we posit that decision making systems with higher degrees of ‘popular responsiveness’ can better constrain such groups and are more likely to produce equality-oriented outcomes. We examine the theory in a comparative case study of recent inheritance tax policy (non-)reforms in the United States, the United Kingdom, Sweden and Denmark.