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Taxation and Democracy

Taxation and Democracy: Swedish, British and American Approaches to Financing the Modern State

Sven Steinmo
Copyright Date: 1993
Published by: Yale University Press
Pages: 302
  • Book Info
    Taxation and Democracy
    Book Description:

    Taxation and Democracyis the first book to examine the structure, politics, and historic development of taxation policies in several countries. Comparing three quite different political democracies--Sweden, Britain, and the United States--the book provides a powerful account of the ways these democracies have managed to finance their welfare programs despite widespread public resistance to taxes. Sven Steinmo argues that the different political structures of these countries produce varying tax systems and, by extension, differing social policy regimes.According to Steinmo, all democracies face a basic dilemma--how government can be both autonomous and responsive to public wishes. This dilemma is a crucial factor in explaining their different tax systems. In the United States, for example, the system of multiple checks and balances and fragmented political authority has led to a tax system that is complex, inefficient, and has a low revenue yield. Sweden's corporatist model of government is less responsive to the will of the masses, and so the country has a surprisingly regressive tax system that is stable, efficient, and has a high revenue yield: its working class basically agrees to accept a heavy tax burden in exchange for heavy social welfare spending. The British government, which is dominated by strong parties, can virtually dictate tax policy preferences to the Parliament, and so its tax system is highly unstable, as is the distribution of tax burdens among classes. Steinmo demonstrates that the "New Institutionalism" can account for both historic continuities and political change--that common economic and political forces confronting these countries in the twentieth century were shaped by each country's changing political institutions. His study thus makes an important contribution to comparative political theory as well as to our understanding of the development of the modern welfare state.

    eISBN: 978-0-300-16050-5
    Subjects: Political Science

Table of Contents

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  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. List of Figures
    (pp. ix-x)
  4. List of Tables
    (pp. xi-xii)
  5. Preface
    (pp. xiii-xvi)
  6. List of Abbreviations
    (pp. xvii-xx)
  7. 1 Introduction
    (pp. 1-13)

    Governments need money. Modern governments need lots of money. How they get this money and whom they take it from are two of the most difficult political issues faced in any modern political economy. These are issues that are settled quite differently in different societies. Yet students of politics have largely ignored tax policy over the decades. Given the hundreds of studies that examine the political struggles behind such welfare state programs as health care insurance, family policy, education, social welfare, and pensions, the paucity of studies that focus on how welfare states finance these programs is striking.¹ This gap...

  8. 2 Common Paths—Divergent Patterns
    (pp. 14-49)

    Most people think taxes are confusing and unpleasant. That may explain why they have been so little studied by political scientists. Most people cannot figure out their own taxes, let alone understand an entire system. Even seasoned scholars who have spent much of their adult lives researching, analyzing, and writing about how governments spend money usually know little about how governments raise money. This chapter is intended to fill some of the gaps in our knowledge about tax policy and tax policy development generally. It is, one might well be surprised, an interesting story.

    In many ways two stories can...

  9. 3 The Emergence of Modern Taxation, 1800–1920
    (pp. 50-79)

    Classical tax systems were amazingly complicated affairs. They consisted of an array of taxes on virtually every imaginable source. Moreover, as the poem above mockingly points out, there was little consistent logic driving the system as a whole or allowing people to make sense of the choices of one type of tax over another—other than the state’s need for money. The worst rub, however, was that these taxes generated very little revenue for the state.

    Modern tax systems are, in contrast, remarkably efficient and coherent, though they are by no means all equally so. Not only do a small...

  10. 4 The Historic Compromise, 1918–1945
    (pp. 80-119)

    In the decade following the Great War, bourgeois parties appeared to dominate the political agenda in Sweden, Great Britain, and the United States as well as in a great many other industrial democracies. Marginal tax rates on both the wealthy and corporations were reduced; the heavy wartime defense duties and levies were abolished while consumption taxes and custom duties were increased. In no case, however, could the Right dictate its policy preferences. Instead, they were forced to compromise with the recently enfranchised working class. Though capitalists demanded that elected officials repeal or drastically reduce income and corporation taxes, these officials...

  11. 5 Postwar Tax Policy—More Revenue Gain, Less Political Pain
    (pp. 120-155)

    To understand the development of modern taxation over the thirty years following World War II, the most elementary factor to keep in mind is that the means of generating government revenues was transformed during the war. Not only was the tax base radically broadened in the 1940s, but also the administration of the personal income tax was changed forever by the payas-you-earn withholding system. Instead of paying taxes yearly or quarterly, taxpayers found their taxes being deducted from their paychecks each pay period. And, as David Brinkley wryly notes, this forever changed the fiscal possibilities available to the state.


  12. 6 Rethinking Modern Taxation: Taxation in a Global Economy
    (pp. 156-192)

    The world economy has undergone astounding changes since the 1970s: it has, in a word, globalized. Such globalization is bringing about a dramatic restructuring of tax systems throughout the world. In chapter 3 I noted how the introduction of mass suffrage provided a political stimulus that led to the introduction of progressive taxation and the legitimation of the principle of ability to pay. In this chapter I shall argue that the ongoing changes in the world economy are having an analogous impact on tax policy in the modern world—but with a decidedly different effect.

    In the 1980s a huge...

  13. 7 Taxes, Democracy, and the Welfare State
    (pp. 193-210)

    The size of the welfare state varies dramatically from one country to another—and so does the size of the tax burden. Though I have never seen it explicitly argued, I think that most political scientists believe that differences in tax burdens are explained by differences in spending desires. In short, the United States taxes its citizens less than Sweden because Americans do not like government spending as much as Swedes. I suggest that the causal arrow in fact points the other way. Both Swedes and Americans like public spending and hate taxes. The key difference in the size of...

  14. Notes
    (pp. 211-236)
  15. Bibliography
    (pp. 237-268)
  16. Index
    (pp. 269-280)