Trade and redistribution: trade politics and the origins of progressive taxation

Abstract

AbstractWhat explains variation in tax progressivity before World War I? I argue that trade politics shaped the emergence of progressive taxation. If labor could provide a useful ally, trade policy coalitions meant compromise on redistributive demands: progressive taxes, especially where inequality was lower. In time-series cross-sectional analysis, I find that trade interest proximity between labor and elites was associated with more progressive taxation in ten European countries between 1870 and 1913 under conditions of low inequality. The coalition and compromise mechanism is evident in sub-national evidence from Britain. Where constituency interests favored free trade, Liberal–Labour electoral alliance was more likely in 1906, and the local MP was more likely to support the 1909 “People's Budget” for progressive taxation.