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Tax Policy in an Era of Internationalization: Explaining the Spread of Neoliberalism

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  • Swank, Duane
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    Abstract

    I offer an explanation for the widespread diffusion of neoliberal tax policies in the developed democracies. After accounting for the policy influences of commonly experienced domestic and international forces, I consider several plausible paths of diffusion of neoliberal tax structure. My central argument is that the highly visible 1980s market-conforming tax reform in the United States should be especially important in shaping subsequent tax policies in other polities. There are substantial reasons to believe, however, that domestic political and institutional forces will shape policymaker assessment of the benefits and costs of neoliberal reforms: the strength of right parties and the degree to which the median voter has moved right should condition adoption of neoliberal tax policy; the institutions of national and sector-coordinated capitalism should also slow the enactment of neoliberal tax reforms. I assess these arguments with empirical models of 1981 98 tax rates on capital in sixteen nations. I find that changes in U.S. tax policy influence subsequent reforms in other polities; in the long term, all nations move toward the U.S. neoliberal tax structure. Analysis also shows, however, that the short-term responsiveness to U.S. tax reforms is notably greater where uncoordinated market institutions are dominant. Theory and extensive qualitative and quantitative evidence indicate that pressures to compete for mobile assets, as balanced against the economic and political costs of adoption, anchor the process of diffusion of neoliberal tax policy. There is little evidence for the view that systematic policy learning or social emulation drove tax policy diffusion.Earlier versions of this article were presented at the Center for European Studies and Weatherhead Center for International Affairs, Harvard University; Center for International Studies, UCLA; and Yale University as well as the 2002 Annual Meetings of the American Political Science Association. An earlier version was published as Minda de Gunzburg Center for European Studies, Harvard University, Working Paper 120. I thank Alex Hicks, Rob Franzese, Torben Iversen, Andy Martin, Cathie Jo Martin; participants in the Yale, UCLA, and Harvard conferences, especially Geoffrey Garrett, Helen Milner, Dennis Quinn, and Beth Simmons; and two anonymous referees and the editors of International Organization for helpful comments. I also gratefully acknowledge the contribution of Sven Steinmo that comes by way of our past collaborative work on tax policy.

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    Bibliographic Info

    Article provided by Cambridge University Press in its journal International Organization.

    Volume (Year): 60 (2006)
    Issue (Month): 04 (October)
    Pages: 847-882

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    Handle: RePEc:cup:intorg:v:60:y:2006:i:04:p:847-882_06

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    Cited by:
    1. Troeger, Vera, 2012. "Monetary Policy Flixibility in floating Exchange Rate Regimes: Currency Denomination and Import Shares," CAGE Online Working Paper Series 82, Competitive Advantage in the Global Economy (CAGE).
    2. Eric Neumayer & Thomas Plümper, 2012. "Conditional spatial policy dependence: theory and model specification," LSE Research Online Documents on Economics 44457, London School of Economics and Political Science, LSE Library.
    3. Nathan M. Jensen Washington University, Rene Lindstadt, Trinity College Dublin, 2009. "Leaning Right and Learning from the Left: Diffusion of Corporate Tax Policy in the OECD," The Institute for International Integration Studies Discussion Paper Series iiisdp290, IIIS.
    4. Philipp Genschel & Achim Kemmerling & Eric Seils, 2011. "Accelerating Downhill: How the EU Shapes Corporate Tax Competition in the Single Market," Journal of Common Market Studies, Wiley Blackwell, vol. 49(3), pages 585-606, 05.
    5. Markus Leibrecht & Claudia Hochgatterer, 2012. "Tax Competition As A Cause Of Falling Corporate Income Tax Rates: A Survey Of Empirical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 26(4), pages 616-648, 09.
    6. Lierse, Hanna, 2012. "Partisanship and taxation: An exploratory study of crisis responses," TranState Working Papers 159, University of Bremen, Collaborative Research Center 597: Transformations of the State.
    7. Ferry Koster, 2007. "WP 47 - The effects of social and political opennes of the welfare state in 18 OECD countries, 1970-2000," AIAS Working Papers wp47, AIAS, Amsterdam Institute for Advanced Labour Studies.
    8. Walton Padelford & Darin White, 2010. "The Influence of Historical Socialism and Communism on the Shaping of a Society’s Economic Ethos: An Exploratory Study of Central and Eastern Europe," Journal of Business Ethics, Springer, vol. 97(1), pages 109-117, November.
    9. Katharina Holzinger & Thomas Sommerer, 2011. "‘Race to the Bottom’ or ‘Race to Brussels’? Environmental Competition in Europe," Journal of Common Market Studies, Wiley Blackwell, vol. 49(2), pages 315-339, 03.

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