Economic Elites, Regional Cleavages, and the First Attempts at Introducing the Income Tax in Argentina

Abstract

Abstract This article analyzes Minister Víctor Molina’s 1924 income tax proposal, one of the first attempts to introduce this tax in Argentina, and explores the reasons for its failure. Argentine governments did not show a permanent commitment to fiscal reform during the 1920’s, mainly because the economic situation was not dire and the Treasury was able to finance its deficits through foreign debts due to the good performance of Argentine external sector. Nonetheless, Molina’s proposal was passed by the Chamber of Deputies and therefore it could have been the first income tax law in the country. Public opinion, intellectuals, and economists seemed to be persuaded that income tax was the solution to Argentine fiscal problems. Moreover, some key social sectors like rural or industrial entrepreneurs, without enthusiastically supporting the income tax, were disposed to tolerate it. In this article, I argue that we need a political interpretation of the failure of tax reform during 1920s. Molina’s draft was blocked in the Senate by the majority of the representatives of the interior provinces. In fact, income tax was considered to be a threat to the less affluent provinces of Argentina because it implied a step toward tax centralization and unification. Yet the economic weakness of the interior did not imply political weakness, and the interior provinces were the main obstacle to fiscal reform in Argentina until the 1930s.