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.

Weekly Wanderlust: Yellowstone

Yellowstone is the world’s first national park, and home to some of the oldest and most awe inspiring sites in the United States. Commonly known for tourist attractions such as the geyser Old Faithful, Yellowstone is a complex geothermal area containing half the world’s natural geysers. It is also a highly valued protected ecosystem, home to some of the most amazing wildlife, from grizzly bears and wolves, to herds of bison and elk. The human story of Yellowstone spans more than 11,000 years, making the area an important archaeological site as well.

Grand Canyon

Grand Canyon of Yellowstone

Grand Prismatic Spring

Grand Prismatic Spring

Excelsior geyser

Excelsior geyser

 

Whether you plan to camp, hike, fly-fish, or immerse yourself in the region’s history, you may want to check out Justin Farrell’s new book, The Battle for Yellowstone for some background on the park’s moral, cultural, and spiritual roots.

Farrell jacketYellowstone is globally recognized as the crown jewel of modern environmental preservation. But the park and its surrounding regions have recently become a lightning rod for environmental conflict, plagued by intense and intractable political struggles among the federal government, National Park Service, environmentalists, industry, local residents, and elected officials. The Battle for Yellowstone asks why it is that, with the flood of expert scientific, economic, and legal efforts to resolve disagreements over Yellowstone, there is no improvement?

Justin Farrell argues that the battle for Yellowstone has deep moral, cultural, and spiritual roots that until now have been obscured by the supposedly rational and technical nature of the conflict. Tracing the moral causes and consequences of large-scale social change in the American West, he describes how a “new-west” social order has emerged that has devalued traditional American beliefs about manifest destiny and rugged individualism.

Justin Farrell is assistant professor of sociology in the School of Forestry and Environmental Studies at Yale University. You can read a Q&A with him here.

Photos of Yellowstone courtesy of Claudia Classon

Throwback Thursday #TBT: The Papers of Thomas Jefferson

The Papers of Thomas Jefferson

Happy Thursday, everybody! Welcome to a new edition of Throwback Thursday! On this week’s #TBT, we’re discussing Princeton University Press’s massive ongoing series, The Papers of Thomas Jefferson.

Projected to fill 60 volumes, the series began in 1950 with the publication of its first installment. The latest volume, 41, will be published early next year. Featuring all of Jefferson’s 18,000 letters as well as the more than 25,000 letters written to him, this magnificent project encompasses the third president’s private life and his contributions to American history, and represents an indispensable resource for historians. Barbara G. Oberg currently serves as the series’s general editor.

Jefferson’s Memorandum Books: Accounts, with Legal Records and Miscellany, 1767-1826 was published in 1997 as part of the Second Series of The Papers. This volume contains the most detailed coverage of Jefferson’s everyday life, and offer fascinating insights into the man’s mind. The Journal of Southern History called the volume “a resource rich in possibility for those who seek to understand the man and his world.”

We hope you’ve enjoyed this installment of #TBT. See you next Thursday!

 

 

Angela Stent on US-Russia relations – a video

Angela Stent discusses the issues within her new book The Limits of Partnership: U.S.-Russian Relations in the Twenty-First Century with The Economist’s Europe Editor, John Peet in this video from The Economist. What are the main factors contributing to the prickly political relationship between Russia and the United States? Angela Stent explains here.

 

The 50th Anniversary of the JFK Assassination

JFKToday marks the 50th anniversary of the assassination of President John F. Kennedy. The 35th President of the United States, he was one of four presidents who have ever been assassinated while in office (the other three being Lincoln, McKinley and Garfield). He was shot and killed in a presidential motorcade in Dallas, Texas on November 22nd, 1963 at 12:30 pm.

To honor JFK and all of our fearless leaders of the United States since George Washington was inaugurated in 1789, we’re posting a list of some of our best presidential titles to remind us all of the dedication these men put forth in their time leading our country.

Rest in Peace, Mr. President.


Quotable Jefferson
The Quotable Jefferson

Collected & Edited by John P. Kaminski

The Quotable Jefferson is the first book to put Jefferson’s words in context with a substantial introduction, a chronology of Jefferson’s life, the source of each quotation, an appendix identifying Jefferson’s correspondents, and a comprehensive index. The main section of Jefferson quotations, which are arranged alphabetically by topic, is followed by three other fascinating sections of quotations: Jefferson on his contemporaries, his contemporaries on him, and Jefferson on himself.

Nixon
Richard Nixon: Speeches, Writings, Documents

Edited and Introduced by Rick Perlstein

The first book to present America’s most controversial president in his own words across his entire career, this unique collection of Richard Nixon’s most important writings dramatically demonstrates why he has had such a profound impact on American life. This volume gathers everything from schoolboy letters to geostrategic manifestos and Oval Office transcripts to create a fascinating portrait of Nixon, one that is enriched by an extensive introduction in which Rick Perlstein puts forward a major reinterpretation of the thirty-seventh president’s rise and fall.

Reagan
Morning in America: How Ronald Reagan Invented the 1980’s

By: Gil Troy

Did America’s fortieth president lead a conservative counterrevolution that left liberalism gasping for air? The answer, for both his admirers and his detractors, is often “yes.” In Morning in America, Gil Troy argues that the Great Communicator was also the Great Conciliator. His pioneering and lively reassessment of Ronald Reagan’s legacy takes us through the 1980s in ten year-by-year chapters, integrating the story of the Reagan presidency with stories of the decade’s cultural icons and watershed moments-from personalities to popular television shows.

Bush
The Presidency of George W. Bush: A First Historical Assessment

Edited by Julian E. Zelizer

The Presidency of George W. Bush brings together some of today’s top American historians to offer the first in-depth look at one of the most controversial U.S. presidencies. Emotions surrounding the Bush presidency continue to run high–conservatives steadfastly defend its achievements, liberals call it a disgrace. This book examines the successes as well as the failures, covering every major aspect of Bush’s two terms in office. It puts issues in broad historical context to reveal the forces that shaped and constrained Bush’s presidency–and the ways his presidency reshaped the nation.

Obama
Reading Obama: Dreams, Hope, and the American Political Tradition (New in Paper)

By: James T. Kloppenberg

Reading Obama reveals the sources of Obama’s commitment to democratic deliberation: the books he has read, the visionaries who have inspired him, the social movements and personal struggles that have shaped his thinking. Kloppenberg shows that Obama’s positions on social justice, religion, race, family, and America’s role in the world do not stem from a desire to please everyone but from deeply rooted–although currently unfashionable–convictions about how a democracy must deal with difference and conflict.

Presidential Leadership
Presidential Leadership and the Creation of the American Era

By: Joseph S. Nye, Jr

Spanning multiple presidencies, this book examines the foreign policy decisions of the presidents who presided over the most critical phases of America’s rise to world primacy in the twentieth century, and assesses the effectiveness and ethics of their choices. The book shows how transformational presidents like Wilson and Reagan changed how America sees the world, but argues that transactional presidents like Eisenhower and the elder Bush were sometimes more effective and ethical. It also draws important lessons for today’s uncertain world, in which presidential decision making is more critical than ever.

Presidential Difference
The Presidential Difference: Leadership Style from FDR to Barack Obama (Third Edition)

By: Fred I. Greenstein

In The Presidential Difference, Greenstein provides a fascinating and instructive account of the presidential qualities that have served well and poorly in the Oval Office, beginning with Franklin D. Roosevelt’s first hundred days. He surveys each president’s political skill, vision, cognitive style, organizational capacity, ability to communicate, and emotional intelligence–and argues that the last is the most important in predicting presidential success. Throughout, Greenstein offers a series of bottom-line judgments on each of his 13 subjects as well as an overarching theory of why presidents succeed or fail.