Q&A with Kenneth Scheve and David Stasavage on Taxing the Rich

Taxing the RichWho to tax, how much to tax, and what the taxes should pay for are questions sure to elicit an array of responses in today’s politically charged climate. Kenneth Scheve and David Stasavage combine forces on this comprehensive history and reflection on how the rich have (or haven’t) been taxed. Taxing the Rich: A History of Fiscal Fairness in the United State and Europe tackles what is sure to be a hot election topic using an approach that manages to showcase both sides of the often contentious issue. Recently the authors took the time to answer some questions on their book.

Why did you write this book?

KS & DS: Taxing the rich is a subject of considerable political conflict today. There has been a great deal of debate about what government should do in this area, but we know far less about the reasons why some governments actually do tax the rich and others do not. We think answering this question requires a long run historical perspective, and one that doesn’t just look at developments in the United States. Our book considers income, inheritance, and other taxes from 1800 to the present in a set of twenty countries.

What’s your main argument?

KS & DS: Countries tax the rich when the public thinks the state has failed to treat citizens as equals and in so doing has privileged the rich. [a more colloquial version: Countries tax the rich when people think the deck is stacked in favor of the wealthy and the government has done the stacking.]

Debates about taxation revolve around self-interest (no one likes paying taxes), economic efficiency, and fairness. We argue that fairness considerations center on what it means for the state to treat citizens as equals in income tax policy. Historically, there are three main fairness arguments that have been used for or against taxing the rich. Equal Treatment arguments claim that everyone should be taxed at the same rate just like everyone has one vote. Ability to Pay arguments contend that states should tax the rich at higher rates because they can better afford to pay when compared with everyone else. Compensatory Arguments suggest that it is fair to tax the rich at higher rates when it compensates for unequal treatment by the state in some other policy area. We argue that over the last two centuries compensatory arguments have been the most powerful arguments in favor of taxing the rich.

What are examples of compensatory arguments in history?

KS & DS: Compensatory arguments were important in the early development of income tax systems in the 19th century when it was argued that income taxes on the rich were necessary to compensate for heavy indirect taxes that fell disproportionately on the poor and middle class. But the most significant compensatory arguments over the last two centuries have been arguments to raise taxes on the rich to preserve equal sacrifice in wars of mass mobilization. These conflicts, particularly World War I and World War II, led states to raise large armies, often through conscription, and citizens and politicians alike adopted compensatory fairness arguments to justify higher taxes on income and wealth. Mass war mobilization led governments of both left and right to tax the rich.

When have countries taxed the rich?

KS & DS: Well, one thing our book shows is that governments haven’t taxed the rich just because inequality is high, nor have they done this simply because the poor and middle class outnumber the rich when it comes to voting. The main occasion when governments have moved to tax the rich is during times of mass mobilization for war, especially in democracies in which the norm of treating citizens as equals is held more strongly. The real watershed for taxing the rich for many countries came in 1914. The era of the two world wars and their aftermath was one in which governments taxed the rich at rates that would have previously seemed unimaginable.

How do we know that the effect of wars was due to changes in fairness considerations?

KS & DS: We show in the book that when countries shift from peace to war, or the reverse, there has also been a big shift in the type of fairness arguments made in favor of taxing the rich. During times of peace debates about whether it is fair to tax the rich center on competing equal treatment and ability to pay arguments. During times of war supporters of taxing the rich have also been able to make Compensatory arguments. If the poor and middle class are doing the fighting, then the rich should be asked to pay more for the war effort. If some with wealth benefit from war profits, then this creates another compensatory argument for taxing the rich. These compensatory arguments had the biggest impact in democracies that are founded on the idea that citizens should be treated as equals. The fact that war had a much bigger impact on taxes on the rich in democracies than in autocracies also suggests that the rich weren’t being taxed out of simple necessity. It was because war determined what types of fairness arguments could be made.

What are the implications for future tax policies in the United States?

KS & DS: Don’t expect high and rising inequality to necessarily lead to a return to the high top tax rates of the post-war era. What really matters is what people believe about how inequality is generated in the first place. If it is clear that inequality has risen because the government failed to treat citizens as equals in the first place, then there is room for convincing compensatory arguments. Today, in an era where military technology favors more limited forms of warfare — drones rather than boots on the ground — the wartime compensatory arguments of old are no longer available. Absent new compensatory arguments, we expect some to argue for taxing the rich based on ability to pay, but this probably won’t suffice to produce radically higher tax rates. More politically plausible reforms include those that involve increasing taxes on the rich by appealing to the logic of equal treatment to remove deductions, exemptions, and cases of special treatment.

Kenneth Scheve is professor of political science and senior fellow at the Freeman Spogli Institute for International Studies at Stanford University. He is the coauthor of Globalization and the Perceptions of American Workers. David Stasavage is Julius Silver Professor in the Wilf Family Department of Politics at New York University. He is the author of States of Credit: Size, Power, and the Development of European Polities (Princeton). Together they wrote Taxing the Rich: A History of Fiscal Fairness in the United States and Europe.

Author Phillip Hoffman offers an In-Depth Look At “Why Did Europe Conquer The World?”

Between 1492 and 1914, Europeans conquered 84 percent of the globe. But why did Europe rise to the top, when for centuries the Chinese, Japanese, Ottomans, and South Asians were far more advanced? Why didn’t these powers establish global dominance? In Why Did Europe Conquer the World?, distinguished economic historian Philip Hoffman demonstrates that conventional explanations—such as geography, epidemic disease, and the Industrial Revolution—fail to provide answers. Arguing instead for the pivotal role of economic and political history, Hoffman shows that if variables had been at all different, Europe would not have achieved critical military innovations, and another power could have become master of the world.

Check out this video in which Hoffman sheds light on the two millennia of economic, political, and historical changes that set European states on a distinctive path of development and military rivalry.


Edmund Fawcett discusses Liberalism: The Life of an Idea [VIDEO]

Love it or hate it, liberalism is here to stay–and it has a long and fascinating history. Edmund Fawcett explains more about his forthcoming book Liberalism: The Life of an Idea in this wonderful video interview with Natalia Nash. How do we define liberalism? Edmund Fawcett explores the underlying ideas that guide the liberal story here:

Learn more about Edmund Fawcett and Liberalism at the Princeton University Press site.

Daniel B. Schwartz Named Co-Winner of 2012 Salo Wittmayer Baron Prize

Daniel B. Schwartz – The First Modern Jew: Spinoza and the History of an Image
Co-Winner of the 2012 Salo Wittmayer Baron Prize, American Academy for Jewish Research

The American Academy for Jewish Research is pleased to announce the winners of its annual Salo Baron Prize for the best first book in Jewish studies published in 2012…The First Modern Jew: Spinoza and the History of an Image [is a] commanding piece of intellectual history that traces the image of Spinoza in a number of different geo-cultural contexts. The prize committee found Schwartz’s authoritative grasp of each of them, from Spinoza’s own time, to eighteenth-century Germany, nineteenth-century East Central Europe, and twentieth-century Palestine, truly remarkable for a scholar for whom this is a first book. The book rests on careful and precise terminological apparatus, as well as on a graceful and compelling writing style.

The Baron Prize honors the memory of the distinguished historian Salo W. Baron, a long-time president of the AAJR, who taught at Columbia University for many decades. It is…one of the signal honors that can be bestowed on a young scholar in Jewish studies and a sign of the excellence, vitality, and creativity in the field.

The First Modern JewPioneering biblical critic, theorist of democracy, and legendary conflater of God and nature, Jewish philosopher Baruch Spinoza (1632-1677) was excommunicated by the Sephardic Jews of Amsterdam in 1656 for his “horrible heresies” and “monstrous deeds.” Yet, over the past three centuries, Spinoza’s rupture with traditional Jewish beliefs and practices has elevated him to a prominent place in genealogies of Jewish modernity. The First Modern Jew provides a riveting look at how Spinoza went from being one of Judaism’s most notorious outcasts to one of its most celebrated, if still highly controversial, cultural icons, and a powerful and protean symbol of the first modern secular Jew.

Ranging from Amsterdam to Palestine and back again to Europe, the book chronicles Spinoza’s posthumous odyssey from marginalized heretic to hero, the exemplar of a whole host of Jewish identities, including cosmopolitan, nationalist, reformist, and rejectionist. Daniel Schwartz shows that in fashioning Spinoza into “the first modern Jew,” generations of Jewish intellectuals–German liberals, East European maskilim, secular Zionists, and Yiddishists–have projected their own dilemmas of identity onto him, reshaping the Amsterdam thinker in their own image. The many afterlives of Spinoza are a kind of looking glass into the struggles of Jewish writers over where to draw the boundaries of Jewishness and whether a secular Jewish identity is indeed possible. Cumulatively, these afterlives offer a kaleidoscopic view of modern Jewish cultureand a vivid history of an obsession with Spinoza that continues to this day.

Daniel B. Schwartz is assistant professor of history at George Washington University.