London School of Economics
Cambridge University Press 2015
Donna Van Cott Award 2016
Inequality and taxation are fundamental problems of modern times. How and when can democracies tax economic elites? This book develops a theoretical framework that refines and integrates the classic concepts of business’s instrumental (political) power and structural (investment) power to explain the scope and fate of tax initiatives targeting economic elites in Latin America after economic liberalization. In Chile, business’s multiple sources of instrumental power, including cohesion and ties to right parties, kept substantial tax increases off the agenda. In Argentina, weaker business power facilitated significant reform, although specific sectors, including finance and agriculture, occasionally had instrumental and/or structural power to defend their interests. In Bolivia, popular mobilization counterbalanced the power of economic elites, who were much stronger than in Argentina but weaker than in Chile. The book’s in-depth, medium-N case analysis and close attention to policy-making processes contribute insights on business power and prospects for redistribution in unequal democracies.
Table of Contents
1. Tax Policy and Economic Elites: Going Where the Money Is
Divergent Reform Experiences
Agenda Formulation and Proposal Outcomes
Outline of the Argument
Business Power, Fiscal Bargaining, and Redistribution in Democracies
Research Strategy
2. The Power of Economic Elites
Instrumental Power
Structural Power
Integrating Analysis of Instrumental and Structural Power
Reform Strategies: Circumventing Elites’ Power
Popular Mobilization: Counteracting (or Reinforcing) Elites’ Power
3. Organized Business and Direct Taxation in Chile: Restricting the Agenda
The Rationale for Increasing the Corporate Tax
Business’s Weak Structural Power
Business’s Strong Instrumental Power
Restricting the Agenda: The Dynamics of Policy Proposals under Lagos
Continuity and Change: Corporate Tax Non-Reform under Bachelet
The 1990 Reform in Retrospect
4. Circumventing Business Power in Chile: Progress at the Margins
The Concertación’s Strategy Repertoire
The 2001 Anti-Evasion Reform
Taxing the Mining Sector
Eliminating a Regressive Income-Tax Benefit
Curtailing a Regressive VAT Credit
5. Weak Economic Elites and Direct Tax Policy Successes in Argentina
Limited Structural Power
Weak Instrumental Powe
Corporate Taxes
Individual Taxes
6. Sectoral Tax Politics in Argentina: Finance
Bank-Information Access and Interest Earnings
Comparative Perspective: Bank-Information Access in Chile
Taxing Financial Transactions
7. Sectoral Tax Politics in Argentina: Agriculture
VAT Politics
Export Taxes
Conclusion: Argentina’s Sectoral Tax Politics
8. Bolivia’s Tax-Policy Tightrope: Powerful Elites and Mobilized Masses
Business’s Instrumental Power
Popular Mobilization
Sanchez de Lozada’s Ill-Fated 2003 Income Tax
Mesa’s 2004 Tax Reform
The 2005 Hydrocarbon Reform
9. Tax Developments under Left Rule in Bolivia and Right Rule in Chile
Morales’ Tax Agenda
Piñera’s Tax Increases
Partisanship and Tax Policy
10. Conclusions
Business Power and Influence
Business Politics and the “Public Good”
Elite Cohesion and Taxation
The Politics of Policies
On Politics and Explanation
Appendix 1.1: Latin America’s Tax Problem
Appendix 1.3: Case Selection
Appendix 1.2: Tax Revenue and Commodity Booms
Appendix 4.1: Chilean Case Universe
Appendix 5.1: Expected Revenue Yield of Direct Tax Reforms