The Politics of Taxation After the Financial Crisis

Abstract

Since the failure of Lehman brothers in 2008, governments around the world have gone deep into public debt to bail out banks and finance stimulus packages. In parallel, voters have voiced increasing concern over the distribution of the resulting fiscal burden. Against this background, who pays and doesn't pay taxes has become a highly salient issue. So far, however, most research on post-crisis tax policy has assumed rather than tested causal relationships between the crisis and tax reforms. Contributions to this panel fill this void, revealing unexpected variance between countries and tax types as well as interactions with political dynamics at the international and national levels. Personal income taxation has, for instance, become more progressive in most developed economies since the crisis. At the same time, taxes on corporate profits have continued to decline. Is this because compensatory arguments are easier to formulate when redistribution between individuals is at stake, or because of different levels of international cooperation against tax evasion and avoidance since the crisis? Moreover, not all countries facing rising public debt have reacted with tax increases. Is this due to differences in government party ideology, national tax systems, or competitive pressure? Contributions to this panel provide answers.