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War mobilization or war destruction? The unequal rise of progressive taxation revisited

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  • Lukas Haffert

    (University of Zurich)

Abstract

This paper sheds new light on the massive increase of progressive taxation in the first half of the twentieth century. Existing studies have explained this increase with the mass mobilization during the World Wars and the call for a fair sharing of the burdens of these wars. My analysis suggests that this effect was not uniform across mobilizing countries. Instead, the call for higher taxation of the rich was curbed by allocational concerns about capital rebuilding in those countries whose capital stock had been severely damaged during the war. Therefore, these countries increased progressive taxes much less. I find some evidence for this thesis in an analysis of top income and inheritance tax rates in 20 developed economies and a case study of tax policy debates in Germany after World War II. My finding has importance for the understanding of progressive taxation as well as for the understanding of tax policies more generally. It suggests that the two World Wars affected the development of tax systems not only through a distributional but also through an allocational channel.

Suggested Citation

  • Lukas Haffert, 2019. "War mobilization or war destruction? The unequal rise of progressive taxation revisited," The Review of International Organizations, Springer, vol. 14(1), pages 59-82, March.
    • Handle: RePEc:spr:revint:v:14:y:2019:i:1:d:10.1007_s11558-018-9300-0
    DOI: 10.1007/s11558-018-9300-0
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    Cited by:

    1. Agustín Goenaga & Oriol Sabaté & Jan Teorell, 2023. "The state does not live by warfare alone: War and revenue in the long nineteenth century," The Review of International Organizations, Springer, vol. 18(2), pages 393-418, April.
    2. Konstantin A. Kholodilin & Sebastian Kohl, 2021. "Rent Price Control – Yet Another Great Equalizer of Economic Inequalities?: Evidence from a Century of Historical Data," Discussion Papers of DIW Berlin 1927, DIW Berlin, German Institute for Economic Research.
    3. Torregrosa Hetland, Sara & Sabaté, Oriol, 2021. "Income Taxes and Redistribution in the Early Twentieth Century," Lund Papers in Economic History 224, Lund University, Department of Economic History, revised 05 Sep 2022.
    4. Dalton C. Dorr & Adrian J. Shin, 2021. "War, inequality, and taxation," Economics and Politics, Wiley Blackwell, vol. 33(2), pages 315-342, July.

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    More about this item

    Keywords

    Taxation; Fiscal policy; War; Political economy; Capital;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
    • N44 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Europe: 1913-

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