The Leap of Faith : The Fiscal Foundations of Successful Government in Europe and America

This is an open access title available under the terms of a CC BY-NC-ND 4.0 International licence. It is free to read at Oxford Scholarship Online and offered as a free PDF download from OUP and selected open access locations. Why are citizens in some countries more willing to pay taxes than in other countries? This book examines the history of the relationship between citizens and their states in five countries, (Sweden, Britain, Italy, Romania, and the United States), and demonstrates how and why people in in some countries have come to trust the government with their money while in other countries they do not. The book explores the evolution of this relationship in detail, in each case showing how some governments developed the fiscal and technical capacity to tax their citizens fairly and deliver public services efficiently. In short, how and why some countries became more trustworthy than others. The volume concludes by examining the implications of these five cases for developing countries today and the lessons that can be learned. Cover The Leap of Faith: The Fiscal Foundations of Successful Government in Europe and America Copyright Preface and Acknowledgments Notes Bibliography Contents List of Figures List of Tables Notes on Contributors Part I: Introduction 1: Introduction: The Leap of Faith The Leap of Faith The Co-Evolution of Political Culture and Political Institutions Fiscal Capacity and the Evolution of Modern States Sweden Italy Britain The USA Romania Conclusion: The State as Predator? Notes References Part II: Sweden 2: Getting to Sweden: The Origins of High Compliance in the Swedish Tax State Introduction Monitoring Capacity Role of the Reformed Church Fiscal Contract Unique Social Structure Late Industrial Development and the Structure of Taxation Conclusion Notes References 3: Creating Tax-Compliant Citizens in Sweden: The Role of Social Democracy Perceptions of Fairness and Tax Compliance Raising Taxes and Constructing the Welfare State: 1945–70 State capacity to collect taxes Justifying taxes: the precondition of the welfare state Defending a Challenged Tax System: The 1970s and 1980s Questioned state capacity to collect taxes The logic of fairness and a new understanding of taxes Technical progress and improved state capacity Conclusions References Primary Sources Secondary Sources Part III: Italy 4: Tax Evasion in Italy: A God-Given Right? Introduction Tax Evasion in Italy Religion and Tax Morale Church and State in Nineteenth-Century Italy Risorgimento and Anti-Risorgimento Just Catholic taxation Reconciliation? State and Church from Mussolini to Democrazia Cristiana Conclusion Notes References 5: Explaining Italian Tax Compliance: A Historical Analysis The Risorgimento and Italian Politics The Fascist Period The First Republic From the Tax Reform of 1972 to the Present Discussion and Conclusions Notes References Part IV: United Kingdom 6: Creating Consent: Taxation, War, and Good Government in Britain, 1688–1914 Creating a Fiscal State Losing Consent (Re)creating Consent Consequences and Conclusion Notes References 7: “When We Were Just Giving Stuff Away Willy-Nilly”: Historicizing Contemporary British Tax Morale Introduction The British Tax State Historicizing Contemporary Tax Morale: Macro-Level Analysis Historicizing Contemporary Tax Morale: Micro-Level Analysis Conclusion Note References Part V: United States 8: The Not-So-Infernal Revenue Service?: Tax Collection, Citizens, and Compliance in the United States from the Eighteenth to the Twentieth Centuries Introduction Invisible Tax, Invisible Collection (1776–1913) Finding Common Ground (1913–1941) Withholding, Businessmen, and Mass Consent (1941–1960) Chain Reaction, Eroding Consent (1970–2010) Conclusion Notes References 9: Seeing Taxation in the Mid-Twentieth Century: US Tax Compliance A Visionary Notion Legibility for Citizens Tax Evasion in the 1930s Social Security The Voluntary Regime The Quest for Legitimacy Legitimacy of Mass Income Tax Making Tax Payments Less Voluntary The Postwar Period Conclusion Notes References Part VI: Romania 10: Tax Collection without Consent: State-Building in Romania Why Use Historical Analysis in the Romanian Case Study? Legitimacy and Social Expectations on Redistribution Taxes, intermediaries, and bureaucratic genesis The Church as a redistribution agent The Romanian Principalities of Wallachia and Moldavia: Fiscal Responsibilities and Payment Mechanisms Periphery status and contractual legitimacy Tax collectors and duties owed Formal and informal systems of payment Transylvania and the Early Development of Administrative Capacity Collection and redistribution Duties owed and resources Concluding Remarks Notes References 11: Willing to Pay? The Politics of Engendering Faith in the Post-Communist Romanian Tax System The Puzzle Path Dependencies The Unfinished Post-Communist Fiscal Contract The Welfare State and Inequality Conclusions Notes References Part VII: Conclusion 12: Taxation and Consent: Implications for Developing Nations So What? Strong States and Successful Societies Promoting positive social norms Building a sense of identity and/or purpose Building Fiscal Legitimacy Lessons Learned Monitoring Enforcement Equity/fairness Recommendations for Policies Conclusion Notes References Name Index Subject Index This book examines the evolution of the relationship between taxpayers and their states in Sweden, Italy, the United Kingdom, the United States, and Romania, and asks why tax compliance is so much higher in some countries than others. The book shows that successful states have built strong administrative capacities, tax citizens fairly and equitably, and deliver public services that are tangible to taxpayers. The main substantive chapters explore the history of a particular country demonstrating how and why these capacities were developed (or not). The book is part of a larger project entitled “Willing to Pay?” which brings together historical institutional analysis with experimental methods. A series of articles as well as a subsequent book elaborate the specific findings from the experiments undertaken in each country. These experiments, however, cannot tell us why compliance behavior differs so much across societies. The Leap of Faith offers just such an explanation by showing the history of the relationship between taxpayers and their states over time in several countries, allowing an answer to the question: Why are some countries more successful at implementation than others? The book concludes with a policy-oriented chapter written specifically with tax and revenue administrators in the developing world in mind. Drawing on lessons from the historical chapters it is argued that effective administration and equitable distribution of both taxes and public spending are keys to generating taxpayer consent This is the first book to compare the history of tax compliance in several countries (Sweden, Britain, Italy, Romania, and the United States) The book clearly elaborates the policy lessons from the five cases explored for countries who are currently trying to build successful and effective tax policies Makes the direct connection between historical cases and current policy issues in developed and developing countries Why are citizens in some countries more willing to pay taxes than in other countries? This book examines the history of the relationship between citizens and their states in five countries, (Sweden, Britain, Italy, Romania, and the United States), and demonstrates how and why people in in some countries have come to trust the government with their money while in other countries they do not. The book explores the evolution of this relationship in detail, in each case showing how some governments developed the fiscal and technical capacity to tax their citizens fairly and deliver public services efficiently. In short, how and why some countries became more trustworthy than others. The volume concludes by examining the implications of these five cases for developing countries today and the lessons that can be learned This policy-oriented chapter draws specific lessons from the historical narratives of previous chapters that should be of interest to tax policymakers and policy activists in developing nations today. The chapter attempts to answer the "So What?" question by drawing on the historical analyses of previous chapters. The chapter highlights what has worked well in different countries and the tax policies that have been less successful at generating taxpayer consent. It also examines why some policies have been less successful over time in different countries. It argues that states which have been most successful in generating high levels of compliance (1) develop strong administrative capacities, (2) treat taxpayers equitably, (3) generate a common sense of purpose or identity, and (4) do not discriminate in favor or against specific segments of society. "Why are citizens in some countries more willing to pay taxes than in other countries? This book examines the history of the relationship between citizens and their states in five countries, (Sweden, Britain, Italy, Romania, and the United States), and demonstrates how and why people in in some countries have come to trust the government with their money while in other countries they do not. The book explores the evolution of this relationship in detail, in each case showing how some governments developed the fiscal and technical capacity to tax their citizens fairly and deliver public services efficiently. In short, how and why some countries became more trustworthy than others. The volume concludes by examining the implications of these five cases for developing countries today and the lessons that can be learned."--Page 4 of dust jacket Sponsor information: The research leading to these results has received funding from the European Research Council under the European Union's Seventh Framework Programme (FP/2007-2013).