How Federal and Legislative Institutions Shape Tax Policy in Normal and Crisis Times: The Case of Argentina, 1983 − 2011

This paper explores the role of institutions in shaping tax policy, with special focus on federal-fiscal bargains within legislatures. Specifically, it analyzes how legislative amendments to tax bills that introduce continuity in pro-provincial revenue-sharing rules and changes in the scope of Value-Added and Income taxes to favour sub-national interests help both the approval of tax reforms in general and particularly the boosting of tax revenues. The paper draws ideas from the literatures on political institutions, comparative fiscal federalism, and politics in hard times. We argue that lawmaking rules shape policy outcomes via path dependence and account for the specific legislative mechanisms through which vertical fiscal imbalance is reinforced in federations. We also show how these fiscal-federal bargains operate in both ordinary and crisis situations. At the empirical level, this paper builds on a new dataset on tax lawmaking in Argentina between 1983 and 2011. On the basis of expert coding of tax bills and their amendments, the dataset captures the evolution of tax lawmaking activity on eight dimensions: the taxes affected; the duration of tax rules; their scope; potential revenue; effect on efficiency; effect on equity; impact on intergovernmental fiscal relations; and earmarking of tax revenues. Although this work focuses on the Argentine experience, valuable in itself given that Argentina ranks first in quantity of reforms both among Latin American and OECD countries in the past two decades (Hallerberg and Scartascini 2012), it involves the following comparative dimensions. Firstly, our research is based on a systematic longitudinal within-case analysis. We compare patterns of tax policymaking across critical junctures and examine how the Argentine tax system has evolved over time. Secondly, we increase the number of observations by looking at sub-national variation. Finally, we frame the discussion around wider contemporary debates on the new politics of taxation and fiscal sociology.