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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

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