Taxing the Working Poor

Taxing the Working Poor

The Political Origins and Economic Consequences of Taxing Low Wages

Achim Kemmerling

In most industrialized countries the tax burden of poor people has increased dramatically over the last few decades. This book analyses both the political origins of this increase and its consequences for the labour market.

Chapter 5: Empirical Evaluation

Achim Kemmerling

Subjects: economics and finance, labour economics, public sector economics, social policy and sociology, labour policy


In this chapter I will deliver some empirical tests for the relationship between left political preferences and the progressivity of the tax mix. The major claims were both cross sectional – why do some countries have a higher share of income taxation – and cross-temporal – why does income taxation decline in most countries. It is needless to say that such questions are difficult to pin down with any methodology in comparative political economy (Kittel and Winner, 2005). Instead, I follow the path of many contributions in the field that ‘triangulate’ several sources of empirical evidence (Iversen, 1999; Mares, 2006; Rueda, 2005). In particular, I will cross-validate quantitative findings for several countries with historical and case-study evidence. I use quantitative evidence to gauge the validity of my claims for a set of 20 OECD countries for some 30 years. In doing so, I have to restrict my analysis to coarse operationalizations of my key variables. The upside is that I can deal with some important issues such as competitive explanations. I use the historical analysis of nineteenthcentury Germany to understand the importance of slowly changing variables such as the role of the welfare state. It also serves to remind us that historically the intuitive nexus between the left and tax progressivity is correct. Finally, I use a comparison of the UK and Germany after the Second World War to show that this nexus is not so clear any more. In the comparative case studies I can also do justice to the multidimensional characteristics...

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