Social Democracy Constrained: Indirect Taxation in Industrialized Democracies
The determinants of the welfare state have received a great deal of attention in the comparative political economy literature. An analysis of the role that indirect taxation plays in the politics of advanced industrial societies is, however, missing. This article demonstrates that a full understanding of the links between redistribution, social democracy and corporatism is impossible without a closer look at indirect taxation. Conventional wisdom is questioned and it is shown that social democratic governments in corporatist environments find themselves in a paradoxical situation. They need to support the welfare state by relying upon a fundamentally regressive policy instrument: indirect taxation. It is also shown that social democratic governments can minimize the use of consumption taxes as part of their redistributive strategy only in non-corporatist settings. In exploring these issues, this article illuminates alternative routes for the pursuit of equality in a context of declining corporatist arrangements.
a The authors share equal responsibility for the contents of this article. The order of the names is purely alphabetic. Previous versions of this article were presented at the 2003 Annual Meetings of the Midwest Political Science Association and of the American Political Science Association, at the 2006 British Journal of Political Science Conference, and in talks at Oxford University and the Hertie School of Governance, Berlin. We would like to thank Christopher Anderson, Carles Boix, Thomas R. Cusack, Robert Franzese, Desmond King, Michael McDonald and David McKay, as well as three anonymous reviewers and Hugh Ward, for their comments and suggestions. We also thank Mary Santy for her editorial assistance. The usual disclaimer applies.