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Partisanship and taxation: An exploratory study of crisis responses

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  • Lierse, Hanna

Abstract

With the outbreak of the financial crisis in 2008, European governments extensively intervened to avert a severe economic recession. Taxation is a crucial instrument to achieve such economic objectives, but it also represents a redistributive tool in democratic societies. Generally, left-wing parties are more supportive of progressive taxes and redistribution than right-wing governments. As a crisis response, one could assume that European governments, especially social-democrats, reinforced a redistributive stance to compensate for the substantial amounts of public money used to bail-out financial institutions. Yet, the internationalisation of capital markets has made it difficult to levy high income taxes as it might cause capital flights, less investments and growth. Based on the tax reforms introduced between 2008 and 2010, the paper explores how European governments mitigated the fiscal stress from the crisis. The findings show that fiscal pressures significantly restrained the policy choices available to governments.

Suggested Citation

  • 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.
  • Handle: RePEc:zbw:sfb597:159
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    1. repec:cup:apsrev:v:71:y:1977:i:04:p:1467-1487_26 is not listed on IDEAS
    2. Arne Heise & Hanna Lierse, 2011. "Wirtschaftskrise, Austeritätspolitik und das Europäische Sozialmodell," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 37(2), pages 201-231.
    3. Swank, Duane, 2006. "Tax Policy in an Era of Internationalization: Explaining the Spread of Neoliberalism," International Organization, Cambridge University Press, vol. 60(04), pages 847-882, October.
    4. repec:clr:wugarc:y:2011:v:37i:2p:201 is not listed on IDEAS
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    Keywords

    crisis; fiscal stress; economic growth; tax policy; political parties; European Union;

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