This insightful book offers a novel response to a long-standing question in the politics of development concerning why some countries tax more than others. Focusing on Latin America, a region with exorbitant economic inequality, low taxation, and wide variation across countries in levels of taxation, Gabriel Ondetti offers an argument that emphasizes the occurrence or non-occurrence of historical episodes of large-scale redistribution and their political impact on subsequent levels of taxation (p. 3). He argues that the key to a country’s tax burden lies in whether statist or anti-statist organizations and ideas became predominant in policy making, thereby favoring or discouraging larger taxes and public sector growth. Anti-statism gained strength as a reaction to major episodes of redistribution that threatened private property. Countries where these threats to private property occurred subsequently displayed relatively lower levels of taxation.
For Ondetti, the primary mechanism linking major redistributive reforms to levels of taxation is the elites’ perception of an existential threat. In response to these threats, economic elites formed cohesive business organizations and political parties to oppose state intervention and weaken its proponents, especially labor movements. Major redistributive reforms thus produced backlashes that stalled or reversed these changes and prevented further reforms from occurring by tilting the balance of power in favor of anti-statism. Absent these threats, elites did not organize effectively, and statism prevailed.
The book focuses empirically on four of the most developed economies of Latin America—Argentina, Brazil, Chile, and Mexico—and the argument is applied as well to two less-affluent cases, Ecuador and Guatemala. Unlike a substantial literature that relies on large-N cross-national analysis, the book builds on and complements a rich qualitative literature on the politics of taxation in the region, especially Tasha Fairfield’s (2015) Private Wealth and Public Revenue in Latin America: Business Power and Tax Politics, which examines the power of elites to deflect tax reforms during the third wave of democracy. Ondetti’s main contribution to this scholarship is to trace and theorize the origins of the current balance of power between anti-statist and statist forces, or economic elites (anti-statist) and popular actors (statist). This allows him to show why economic elites wield much more power in Chile and Mexico than in Argentina and Brazil, where statism has taken a firmer hold.
The book has many strengths. First, it makes excellent use of the existing literature, which it analyzes with a critical juncture framework to account for policy choices and the development of statist and anti-statist forces across time. Case studies are used to assess the framework and provide narratives that are rich, clear, well written, and informative. Because the major redistributive episodes that triggered anti-statist backlashes occurred at different historical times—in the 1930s and 1940s in Mexico and in the 1970s in Chile—these case narratives also display broad temporal variation and cover several decades.
Second, the book emphasizes threats to private property, especially land expropriation by left-wing governments, as major factors that galvanized enduring conservative collective action and the spread of strong preferences against redistribution across different policy areas, including taxation. The impact of these threats is thus enduring and multifaceted, extending beyond the defense of private property.
The book also contributes to at least three literatures. First, as noted, it adds to research on tax politics by presenting a critical juncture argument, in the tradition of Ruth and David Collier’s (1991) Shaping the Political Arena, to account for the relative power of key actors that shape tax policy. With this framework, it also contributes to scholarship on business politics that theorizes about elites’ motivations to develop strong and cohesive organizations. Finally, the book speaks to the literature on social policy, as social expenditure is related to overall levels of taxation. More specifically, social security taxes, which fund different social programs, account for much of the variation in tax levels across cases.
The book is a must read for anyone interested in taxation in Latin America. And, like all good books, it raises questions that, although addressed by the author, could be tackled more fully. The most important of these questions is the use of tax revenue as a share of GDP to measure the tax burden. This measure may not always adequately capture the complexity of tax policy and the effects of the balance of power between statist and anti-statist forces on taxation. Issues such as the tax structure (who pays what), state capacity to extract revenue, and proximate causes of tax levels (e.g., volatility of commodity prices), which may reduce or increase tax collection, leave the reader wondering whether path-dependent dynamics triggered by the occurrence or absence of historical episodes of major redistributive reform are the primary factor driving variation in tax levels across countries and over time.
These questions are particularly relevant for the comparison between Chile and Argentina. Chile is presented as having intermediate levels of taxation, which are attributed to the predominance of anti-statist forces spawned mainly by the onslaught on private property during the left-wing government of Salvador Allende in the early 1970s. By contrast, Argentina, where major reforms that threatened private property did not take place, is presented as having a larger tax burden. However, it is only in the 2000s that Argentina’s tax burden surpassed Chile’s (p. 59). Although Brazil and Mexico do show relatively high and low tax burdens, respectively, a more complex characterization of taxation could better capture the impact of the balance of power between statist and anti-statist forces across cases and over time.
Overall, this is an excellent book that should be on the reading lists of both scholars and policy makers interested in redistributive reforms, because it advances lessons and has empirical implications concerning the potential for lasting equity-enhancing changes. These lessons are particularly timely in light of the pressing challenges facing the region today. The book explicitly suggests that incremental fiscal reforms are more effective than other alternatives in reducing inequality and avoiding subsequent conservative backlashes. One could also extract another theoretical implication from the analysis, which concerns the role of businesses. Consistent with findings from previous literature on taxation in Latin America, when business sectors are split by differential access to policy benefits or directly benefit from state policy, taxes seem to face less resistance, even if economic elites would prefer low taxes.
