The Early Modern Origins of Contemporary Tax Systems

What explains the variation in modern tax systems? This question has driven many classic studies that have generally emphasized the key role that institutions have played in shaping tax outcomes (e.g. Levi 1988, Steinmo 1996, Kato 2010). However, the institutions that have been seen to be key are those of relatively recent times: the constitutional structure of democratic states, the strength of left wing parties, the preferences of the median voter and the ability of electoral systems to articulate them. In this paper we argue that contemporary tax systems have deeper institutional origins, in many cases stretching back to the early modern period. In this period, states struggled with landed and urban elites over the distribution of taxation leading to patterns of variation that we believe map onto contemporary tax outcomes. Specifically, where landed elites were strong they were able to resist the state’s attempts to tax them more effectively, leading to a less equitable distribution of the tax burden. Where landed elites were weak, the state acquired these powers and the opposite outcome prevailed. We argue that these early modern distributional struggles set in motion path dependent development that can still be seen in modern tax systems. Using both qualitative and quantitative methods we map this variation and its effect on the size and distribution of the tax burden in contemporary European states.