The Fiscal Contract: States, Taxes and Public Services
World Politics, Vol. 57, pp. 530-567, July 2005
38 Pages Posted: 27 Aug 2008
Using data from approximately ninety countries, the author shows that the more a state taxes the rich as a percentage of GDP, the more it protects property rights; and the more it taxes the poor, the more it provides basic public services. There is no evidence that states gouge the rich to benefit the poor or vice versa, contrary to state-capture theories. Nor is there any evidence that taxes and spending are unrelated, contrary to state-autonomy models. Instead, states operate much like fiscal contracts, with groups getting what they pay for.
Keywords: states, taxes, public services
JEL Classification: H2, H11, H41
Suggested Citation: Suggested Citation