Between distribution and allocation: growth models, sectoral coalitions and the politics of taxation revisited

Abstract

Abstract Comparative political economists typically analyze taxation as a matter of distribution. This article, by contrast, develops an allocational explanation of tax policy choices: as taxes channel resources into some economic activities and restrain others, they become subject to the allocational concerns of different sectors of the economy. We argue that sectoral coalitions straddling the class divide substantially influence the development of tax systems, and that the power of these coalitions is associated with differences in growth models. Employing a mixed methods approach, we first demonstrate a systematic association between growth models and consumption taxation across advanced capitalist countries. Afterward, we study the German value-added tax increase in 2005 to illustrate the political dynamics behind this result. In this debate, an export sector coalition prevailed over a domestic sector coalition that strongly opposed the reform. We conclude by discussing the wider implications for the study of taxation and comparative capitalism.