Income tax and war inflation: was the ‘blood tax’ compensated by taxing the rich?

"Major warfare and mass mobilization during the two World Wars have been associated to increasing top rates in income taxes in most Western countries, which points towards increases in their progressivity. We argue, however, that this war‐ related effect is less clear‐cut than previously thought. Wartime inflation could have exerted a counteracting impact by pushing citizens into higher tax brackets or including new individuals from the bottom of the income distribution into being taxpayers. In order to address this possibility, we study the developments in the marginal and effective tax rates over the income distribution of a sample of developed countries, both involved and neutral during World War I and World War II. Our preliminary results provide initial support to the hypothesis that inflation partially counteracted the progressive effect of increases in top marginal tax rates."