Small States in World Markets without Inheritance Taxes

Increased taxation of inheritance, residential properties, wealth, and super-taxes imposed on the highest incomes echelons has been advocated as policy solutions to reduce the escalating economic inequality in rich democracies. Yet rates of wealth and inheritance taxation are lowered almost across the board. Surprisingly, a group of small European welfare states – Austria, Norway, Sweden – are at the frontier of this movement, and have repealed their inheritance and wealth tax schemes altogether. We research this puzzle theoretically and empirically in a cross-country comparative study with a particular empirical focus on the politics of inheritance taxation. We submit the hypothesis that politico-institutional specificities of these small states in world markets no longer generate consensus around balancing liberal economic policies with domestic policies of social protection. Inheritance taxes are repealed after lobbying and policy advocacy by organized groups promoting traditional business interests. The political efforts of these groups occur but in a political terrain where they, as a consequence of declined corporatism, largely are unbalanced.