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Taxation, Inequality and Fiscal Contracting in the Americas

38 Pages Posted: 13 Sep 2013  

Richard M. Bird

University of Toronto - Joseph L. Rotman School of Management; Georgia State University - Andrew Young School of Public Policy

Eric M. Zolt

University of California, Los Angeles (UCLA) - School of Law

Date Written: September 6, 2013

Abstract

Since 2000, Latin America has become less unequal, with lower levels of poverty, and likely greater economic mobility. Over a longer time period, the story in the United States is much different. The United States has become more unequal, with relatively high poverty levels, and likely less economic mobility. While these changes largely result from broader economic and political factors, government fiscal policies play some role in changing market outcomes. This Article examines how changes in levels of inequality may influence taxing and spending policies.

It suggests that in both parts of the Americas changing economic and political realities may contribute to a changing 'fiscal contract.' One contributing factor is the economic circumstances of the middle class. In Latin America, improvements in the economic status of the middle class may call for different tax and spending policies. In the United States, the increased economic vulnerability of the middle class and the perceived decline in economic mobility may drive change. In both regions, the extent and nature of change may depend largely on the extent to which the middle class come to think that they may be better served with higher (or lower) taxes (on them, and on the wealthy) and more (or less) robust social spending programs.

Keywords: Fiscal redistribution, taxation, inequality, fiscal contract, Latin America, United States

JEL Classification: D31, H11, H23, O54, P52

Suggested Citation

Bird, Richard M. and Zolt, Eric M., Taxation, Inequality and Fiscal Contracting in the Americas (September 6, 2013). UCLA School of Law, Law-Econ Research Paper No. 13-14; Rotman School of Management Working Paper No. 2321868. Available at SSRN: https://ssrn.com/abstract=2321868

Richard Miller Bird

University of Toronto - Joseph L. Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
905-274-8841 (Phone)

Georgia State University - Andrew Young School of Public Policy

International Studies Program
Atlanta, GA 30303-3083
United States

HOME PAGE: http://www.aysps.gsu.edu

Eric M. Zolt (Contact Author)

University of California, Los Angeles (UCLA) - School of Law ( email )

385 Charles E. Young Dr. East
Room 1242
Los Angeles, CA 90095-1476
United States

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