Abstract

Current explanations of taxation levels have identified a host of factors, such as levels of economic development and GDP per capita, tax handles, tax morale, and political regimes. But none of them can account for Argentina's exceptionalism. Using a "transaction cost politics" approach and the case of Brazil for comparison, this article argues that the key to explaining low taxation in Argentina is political instability. Systemic instability affects the tax behavior of governments. Facing an uncertain future, incumbent governments choose to extract resources from society through inflation rather than normal taxation. This article argues that political institutions, particularly federalism, contribute to instability and thereby reduce the discount rates of government policymakers.

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Additional Information

ISSN
1548-2456
Print ISSN
1531-426X
Pages
pp. 115-148
Launched on MUSE
2007-12-13
Open Access
No
Archive Status
Archived 2007
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