Advertisement

How Employers and Conservatives Shaped the Modern Tax State

  • Alexander Hertel-Fernandez
  • Cathie Jo Martin
Chapter
Part of the Palgrave Studies in the History of Finance book series (PSHF)

Abstract

Coordinated nations with large welfare states rely on comparatively regressive “mass tax” systems, whereas liberal countries with limited welfare states historically embraced more progressive “class tax” systems. This chapter explores the origins of these paradoxical strategies. It suggests that “mass” and “class” tax strategies come from different models of revenue policymaking, organized around the logic of state-building versus crisis mobilization. A state-building model, which produces the mass tax, transpires in countries with strong political institutions for consensual policymaking, and includes support by business and the right, whereas a crisis-mobilization model, which produces the class tax, occurs in countries with few institutions for consensual policymaking. This argument is supported with quantitative data from 1900 to 2000 and case studies of the United States and Denmark.

Keywords

State-building model Crisis-mobilization model Multipartism Two-party system American revenue system Danish revenue system 

References

  1. Acemoglu, Daron, and James A. Robinson. 2009. Economic Origins of Dictatorship and Democracy. New York, NY: Cambridge University Press.Google Scholar
  2. Aidt, Toke, and Peter Jensen. 2009. Tax Structure, Size of Government, and the Extension of the Voting Franchise in Western Europe, 1860–1938. International Tax and Public Finance 16 (3): 362–394.CrossRefGoogle Scholar
  3. Austen-Smith, David, and Jeffrey Banks. 1988. Elections, Coalitions, and Legislative Outcomes. American Political Science Review 82 (2): 405–422.CrossRefGoogle Scholar
  4. Baack, Bennett D., and Edward John Ray. 1985. Special Interests and the Adoption of the Income Tax in the United States. The Journal of Economic History 45 (3): 607–625.CrossRefGoogle Scholar
  5. Bensel, Richard Franklin. 1984. Sectionalism and American Political Development: 1880–1980. Madison, WI: University of Wisconsin Press.Google Scholar
  6. Beramendi, Pablo, and David Rueda. 2007. Social Democracy Constrained. British Journal of Political Science 37 (4): 619–641.CrossRefGoogle Scholar
  7. Bolt, Jutta, and Jan Luiten Van Zanden. 2013. The First Update of the Maddison Project; Re-estimating Growth Before 1820. Maddison Project.Google Scholar
  8. Brownlee, Elliott. 1985. Wilson and Financing the Modern State: The Revenue Act of 1916. Proceedings of the American Philosophical Society 129 (2): 173–210.Google Scholar
  9. Brownlee, Elliott W. 1989. The American Way. The Wilson Quarterly 13 (2): 86–98.Google Scholar
  10. ———. 2016. Federal Taxation in America: A Short History. New York, NY: Cambridge University Press.CrossRefGoogle Scholar
  11. Cohen, Patricia. 2015. What Could Raising Taxes on the 1% Do? Surprising Amounts. The New York Times, October 16.Google Scholar
  12. CQ Press. 1962. Congressional Quarterly Almanac. Washington, DC: Congressional Quarterly Press.Google Scholar
  13. ———. 1964. Congressional Quarterly Almanac. Washington, DC: Congressional Quarterly Press.Google Scholar
  14. Cusack, Thomas, and Pablo Beramendi. 2006. Taxing Work. European Journal of Political Research 45 (1): 43–73.CrossRefGoogle Scholar
  15. Cusack, Thomas R., Torben Iversen, and David Soskice. 2007. Economic Interests and the Origins of Electoral Systems. American Political Science Review 101 (3): 373–391.CrossRefGoogle Scholar
  16. “Direkte Eller Indirekte Skatter.” 7/26/1946. Arbejdsgiveren 47 (15): 226.Google Scholar
  17. “Eengangsskatten.” 7/26/1946. Arbejdsgiveren 47 (15): 226.Google Scholar
  18. “Efter skatteforliget på rigsdagen.” 12/1/1950. Arbejdsgiveren 51 (23): 337.Google Scholar
  19. “En Henvendelse Vedrørende Forslaget til Skatteudskrivningsloven.” 4/1/1949. Arbejdsgiveren 50 (7): 87.Google Scholar
  20. Esping-Andersen, Gosta. 1990. The Three Worlds of Welfare Capitalism. Princeton, NJ: Princeton University Press.Google Scholar
  21. Faricy, Christopher. 2011. The Politics of Social Policy in America: The Causes and Effects of Indirect versus Direct Social Spending. Journal of Politics 73 (1): 74–83.CrossRefGoogle Scholar
  22. Fink, Jørgen. 1996. DA I Danmark. Copenhagen: DA Forlag.Google Scholar
  23. Flora, Peter, Jens Alber, Richard Eichenberg, Jurgen Kohl, Franz Kraus, Winfried Pfenning, and Kurt Seebohm. 1983. State, Economy, and Society in Western Europe 1815–1975. New York, NY: Campus Press.CrossRefGoogle Scholar
  24. Flores-Macias, Gustavo A., and Sarah Kreps. 2013. Political Parties at War: A Study of American War Finance, 1789–2010. American Political Science Review 107 (4): 833–848.CrossRefGoogle Scholar
  25. Folketingsårbog (with Arne Marquard). 1966–1967. Lov om almindelig omsætningsafgift. Copenhagen: J.H. Schultz Forlag.Google Scholar
  26. Ganghof, Steffen. 2006a. Tax Mixes and the Size of the Welfare State: Causal Mechanisms and Policy Implications. Journal of European Social Policy 11 (1): 360–373.CrossRefGoogle Scholar
  27. ———. 2006b. Tax Mixes and the Size of the Welfare State: Causal Mechanisms and Policy Implications. Journal of European Social Policy 16 (4): 360–373.CrossRefGoogle Scholar
  28. Genschel, Philipp, Hanna Lierse, and Laura Seelkopf. 2013. Autocracy, Democracy and Global Tax Competition. Presented at the Seminar on the State and Capitalism Since 1800.Google Scholar
  29. Gersmann, Paul, Alf Therkildsen, and Tobiesen Meyer. 1987. Fra Importregulering Til Moms 1945–1986. Copenhagen: Toldhistoriesk Selskab.Google Scholar
  30. Giltner, Phil. 2001. The Success of Collaboration: Denmark’s Self-Assessment of Its Economic Position After Five Years of Nazi Occupation. Journal of Contemporary History 36 (4): 485–506.CrossRefGoogle Scholar
  31. Glydendals. n.d. Skatter, afgifter og andre offentlige indtægter. Den Store Danske.Google Scholar
  32. Hansen, Svend Aage. 1972. Økonomisk vækst I Danmark. Copenhagen: Universitetsforlaget i København.Google Scholar
  33. Hays, Jude C. 2003. Globalization and Capital Taxation in Consensus and Majoritarian Democracies. World Politics 56: 79–113.CrossRefGoogle Scholar
  34. Heller to JFK. 1961. The Balance-of-Payments Dilemma. Presidential Office Files, Box 73, CEA 11/61. JFK Library, November 28.Google Scholar
  35. ———. 1962. Business Views on the Economic Outlook and Tax Cuts. Presidential office Files, Box 75, CEA 11/7/62-11/14/62, JFK Library, November 10.Google Scholar
  36. Hickey, Michael. 1916. Taxation in Its Relation to Industrial Expansion. American Industries XVII (1): 11.Google Scholar
  37. Howard, Christopher. 2007. The Welfare State Nobody Knows. Princeton, NJ: Princeton University Press.Google Scholar
  38. Hyldtoft, Ole. 1999. Danmarks Økonomiske historie 1840–1910. Aarhus: Systime.Google Scholar
  39. Johansen, Martin. 1985. Arbejderflertallet 1966–1967: Det ‘røde’ kabinet. Socialistisk Arbejderavis 9: 4.Google Scholar
  40. Johansen, Hans Chr. 2007. Indkomstskatter og offentlig vækst. Dansk skattehistorie. Vol. VI.Google Scholar
  41. Journal of Political Economy. 1915. Washington Notes. Journal of Political Economy. 23 (10): 993–1001.Google Scholar
  42. Kato, Junko. 2003. Regressive Taxation and the Welfare State: Path Dependence and Policy Diffusion. New York, NY: Cambridge University Press.CrossRefGoogle Scholar
  43. Kauffeldt, Carl. 1966. Det Konservative Folkepartis Historie I et Halvt Århundrede IV. Copenhagen: Nyt Nordisk Forlag Arnold Busck.Google Scholar
  44. Kenworthy, Lane. 2014. Social Democratic America. New York, NY: Oxford University Press.Google Scholar
  45. Korpi, Walter. 1983. The Democratic Class Struggle. London: Routledge Press.Google Scholar
  46. Korpi, Walter, and Joakim Palme. 1998. The Paradox of Redistribution and Strategies of Equality: Welfare State Institutions, Inequality, and Poverty in the Western Countries. American Sociological Review 63 (5): 661–687.CrossRefGoogle Scholar
  47. Kreuzer, Marcus. 2010. Setting the Rules of the Game. The Choice of Electoral Systems in Advanced Democracies. American Political Science Review 104: 269–292.CrossRefGoogle Scholar
  48. Lijphart, Arend. 1999. Patterns of Democracy: Government Forms and Performance in Thirty-Six Countries. New Haven, CT: Yale University Press.Google Scholar
  49. Lindert, Peter H. 2004. Growing Public: Social Spending and Economic Growth since the Eighteenth Century. New York, NY: Cambridge University Press.Google Scholar
  50. Mackie, Thomas T., and Richard Rose. 1981. The International Almanac of Electoral History. Strathclyde: University of Strathclyde.Google Scholar
  51. Martin, Cathie Jo. 1991. Shifting the Burden: The Struggle Over Growth and Corporate Taxation. Chicago, IL: University of Chicago Press.Google Scholar
  52. Martin, Cathie Jo. 2014. Labor Market Coordination and the Evolution of Tax Regimes. Socio-Economic Review 13 (1): 33–54.CrossRefGoogle Scholar
  53. Martin, Cathie Jo, and Duane Swank. 2004. Does the Organization of Capital Matter? Employers and Active Labor Market Policy at the National and Firm Levels. American Political Science Review 98 (4): 593–611.CrossRefGoogle Scholar
  54. ———. 2012. The Political Construction of Business Interests: Coordination, Growth, and Equality. New York, NY: Cambridge University Press.CrossRefGoogle Scholar
  55. Martin, Isaac. 2013. Rich People’s Movements: Grassroots Campaigns to Untax the One Percent. New York, NY: Oxford University Press.CrossRefGoogle Scholar
  56. Martin, Isaac, Ajay Mehrotra, and Monica Prasad, eds. 2009. The New Fiscal Sociology: Taxation in Comparative and Historical Perspective. New York, NY: Cambridge University Press.Google Scholar
  57. Mehrotra, Ajay. 2004. More Mighty than the Waves of the Sea: Toilers, Tariffs, and the Income Tax Movement, 1880–1913. Labor History 45 (2): 165–198.CrossRefGoogle Scholar
  58. “Meroms og skattereform.” 7/1/65. Arbejdsgiveren 12: 14–5.Google Scholar
  59. Mettler, Suzanne. 2011. The Submerged State: How Invisible Government Policies Undermine American Democracy. Chicago, IL: University of Chicago Press.CrossRefGoogle Scholar
  60. Mitchell, Brian. 2007. International Historical Statistics: Europe, 1750–2005. New York, NY: Palgrave Macmillan.Google Scholar
  61. Mooney, Richard. 1962. U.S. Chamber Asks for Tax Cut Now; Accepts a Deficit. The New York Times, June 30.Google Scholar
  62. Morgan, Kimberly J., and Monica Prasad. 2009. Federal Taxation in America: A Short History. American Journal of Sociology 114 (5): 1350–1394.CrossRefGoogle Scholar
  63. Nation’s Business. 1912. The State Income Tax. Nation’s Business 1 (5): 1.Google Scholar
  64. ———. 1923. A Business Call on Mr. Coolridge. Nation’s Business 11 (11): 46.Google Scholar
  65. Obinger, Herbert, Stephan Leibfried, and Francis Castles. 2005. Federalism and the Welfare State: New World and European Experiences. New York, NY: Cambridge University Press.CrossRefGoogle Scholar
  66. Okun, Arthur M. 1975. Equality and Efficiency: The Big Tradeoff. Washington, DC: The Brookings Institution.Google Scholar
  67. Osgood, Roy. 1936. Federal Revenue Policies. Nation’s Business 24 (6): 54–55.Google Scholar
  68. Peters, Guy B. 1982. Politics of Taxation. New York, NY: Wiley.Google Scholar
  69. Piketty, Thomas. 2014. Capital in the Twenty-First Century. Cambridge, MA: Belknap Press.CrossRefGoogle Scholar
  70. Piketty, Thomas, and Emmanuel Saez. 2007. How Progressive Is the U.S. Federal Tax System? A Historical and International Perspective. Journal of Economic Perspectives 21 (1): 3–24.CrossRefGoogle Scholar
  71. Prasad, Monica. 2012. The Land of Too Much: American Abundance and the Paradox of Poverty. Cambridge, MA: Harvard University Press.CrossRefGoogle Scholar
  72. Prasad, Monica, and Yingying Deng. 2009. Taxation and the Worlds of Welfare. Socioeconomic Review 7 (3): 431–457.CrossRefGoogle Scholar
  73. Robinson, Maurice. 1911. The Federal Corporation Tax. The American Economic Review 1 (4): 691–723.Google Scholar
  74. Rodrik, Dani. 1997. Trade, Social Insurance, and the Limits to Globalization. Cambridge, MA: National Bureau of Economic Research.CrossRefGoogle Scholar
  75. Rogowski, Ronald. 1987. Trade and the Variety of Democratic Institutions. International Organization 41: 203–223.CrossRefGoogle Scholar
  76. Samarbejdsproblemer i Danmarks økonomiske politik. 1955. Rapport fra Formandskabet for det af Finansministeren den 14.12.1955 i henhold til Folketingsbeslutning af 25.11.1955 nedsatte udvalg. http://docplayer.dk/7971469-Samarbejdsproblemer-i-danmarks-oekonomiske-politik.html. Accessed 20 Feb 2018.
  77. Scheve, Kenneth, and David Stasavage. 2010. The Conscription of Wealth: Mass Warfare and the Demand for Progressive Taxation. International Organization 64 (4): 529–561.CrossRefGoogle Scholar
  78. ———. 2016. Taxing the Rich: A History of Fiscal Fairness in the United States and Europe. Princeton: Princeton University Press.CrossRefGoogle Scholar
  79. Seebohm, Kurt. 2009 [1983]. Development of the Tax-Structure in Western European Countries 1815 to 1875. GESIS Data Archive, Cologne.Google Scholar
  80. Steinmo, Sven. 1993. Taxation and Democracy: Swedish, British, and American Approaches to Financing the Modern State. New Haven, CT: Yale University.Google Scholar
  81. Streeck, Wolfgang. 1992. Social Institutions and Economic Performance. Beverly Hills, CA: Sage Press.Google Scholar
  82. Swank, Duane. 2013. Comparative Political Parties Dataset: Electoral, Legislative, and Government Strength of Political Parties by Ideological Group in 21 Capitalist Democracies, 1950–2011. http://www.marquette.edu/polisci/documents/PARTY19502011.xls. Accessed 5 Jan 2014.
  83. Swank, Duane, and Sven Steinmo. 2002. The New Political Economy of Taxation in Advanced Capitalist Democracies. American Journal of Political Science 46 (3): 642–655.CrossRefGoogle Scholar
  84. Thorndike, Joseph. 2009. ‘The Unfair Advantage of the Few’: The New Deal Origins of Soak the Rich Taxation. In The New Fiscal Sociology: Taxation in Comparative and Historical Perspective, ed. Isaac Martin, Ajay Mehrotra, and Monica Prasad, 29–47. New York, NY: Cambridge University Press.CrossRefGoogle Scholar
  85. Tilly, Charles. 1985. Warmaking and Statemaking as Organized Crime. In Bringing the State Back In. New York, NY: Cambridge University Press.Google Scholar
  86. Udfærdiget gennem Finansministeriet. Lov om Indkomst- og Formueskat til Staten. 1922. Se Rigsdagstidenden for 1921–22: Folket. Tid. Sp. 2503, 2766; Landst. Tid. Sp. –, –; Till. A. Sp. 3111; Till. B. 669, –; Till. C. Sp. –, –. https://www.retsinformation.dk/Forms/r0710.aspx?id=63303. Accessed 2 Feb 2018.
  87. Wilensky, Harold L. 2002. Rich Democracies: Political Economy, Public Policy, and Performance. Berkeley, CA: University of California Press.Google Scholar

Copyright information

© The Author(s) 2018

Authors and Affiliations

  • Alexander Hertel-Fernandez
    • 1
  • Cathie Jo Martin
    • 2
  1. 1.Columbia UniversityNew YorkUSA
  2. 2.Boston UniversityBostonUSA

Personalised recommendations