Political Economy of Taxation

Abstract

This review uses theories of political economy to provide an analytical history of systems of taxation, focusing on the determinants of total tax revenue, tax structure, and tax administration. We show that most premodern states extracted very little revenue and that total revenue increased substantially in the nineteenth century, and we explore the possibility that tax revenues have hit a ceiling in the developed world. Our history of tax structure begins by discussing the highly regressive premodern tax systems, turns to the causes of the rise of progressive taxation in the twentieth century, and concludes by arguing that the short era of progressive taxation may be ending. The sections on tax administration discuss the many varieties of premodern patrimonialism, the determinants of the development and diffusion of bureaucratic administration, and the difficulty of taxing wealth in the modern world.