Employment Structure and the Rise of the Modern Tax System
American Economic Review · 2022 · Volume 112 · Issue 1
Abstract
This paper builds a new microdatabase that covers 100 countries at all income levels and long-run time series in the United States (1870–2010) and Mexico (1960–2010) to document how the modern tax system arises over development. I establish a new set of stylized facts, which show that the income tax exemption threshold decreases in the income distribution as a country develops, tracking growth in the employee share of employment that occurs gradually further down the income distribution. Additional evidence supports the interpretation that the rise in third-party covered income through increases in employee share drives expansions of the income tax base over development.
Keywords
Personal Income, Wealth, and Their Distributions, Taxation and Subsidies: Externalities, Redistributive Effects, Environmental Taxes and Subsidies, Personal Income and Other Nonbusiness Taxes and Subsidies, includes inheritance and gift taxes, State and Local Taxation, Subsidies, and Revenue, Time Allocation and Labor Supply, Labor Demand, Economic History: Government, War, Law, International Relations, and Regulation: General, International, or Comparative
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