Taxation in Autocracies: When Is Super-Encompassing Interest Preserved?

Abstract

A theory is introduced to systematically explain autocracies’ diverse experiences with taxation. State power relative to citizens’ capacity for violence determines the limit of taxation, the highest tax rate that citizens will tolerate and pay. Rulers can spend resources on coercion to increase state power. The coercion and taxation levels that they choose to maximize net revenue vary with social and economic conditions leading to various state types: strong, weak, collapsing and benevolent featuring respectively tax tyranny, tax incompetency, tax-induced violence and tax harmony. The theory informs important policy issues.

Keywords: Autocracy, state power, taxation, violence

JEL Classification: D02, D74, D78, H30, N40, O12, P00, P16, P48