Welfare State Structure, Inequality, and Public Attitudes Towards Progressive Taxation.

Sarah Berens (University of Cologne) & Margarita Gelepithis (University of Warwick)

(published in Socio-Economic Review)

Abstract: Recent research indicates that while higher tax levels are politically unpopular, greater tax progressivity is not. However, there remain unanswered questions regarding public support for more progressive taxation. In particular, little is known about how individual attitudes towards tax progressivity are affected by their institutional context. Building on existing theories of redistribution, this paper develops the argument that the structure of the welfare state shapes public attitudes towards progressive taxation – support for progressive taxation among both average and high-income households is undermined by ‘pro-poor’ welfare spending. We support our argument with a cross-sectional analysis of rich democracies, interacting household income with country-level indicators of welfare state structure. In doing so, we contribute a micro-level explanation for the paradoxical macro-level phenomenon that larger, more redistributive welfare states tend to be financed by less progressive tax systems.


Many reasons to ’not’ comply: How government corruption and weak state capacity erode the fiscal contract in Sub-Saharan Africa.

Sarah Berens (University of Cologne) & Armin von Schiller (German Development Institute)

Presented at EPSA, Milan, 2017


Abstract: In this paper, we explore how citizens’ perceptions of the state’s honesty and competence affect fiscal contracts. For such implicit contracts between taxpayers and the state to hold, citizens must accept the state as legitimate collector of taxes. Lack of acceptance can lead to tax evasion or tax flight. We analyze the relative empirical relevance of two rationales that might reduce individual acceptance of taxation through the state: the belief that the state is incapable of efficient usage of tax revenue versus the perception that public officials ‘abuse’ their authority for rent-seeking purposes. Citizens, we claim, are well aware of state limitations and, therefore, punish deviant behavior of public officials more strongly than state incapacity. This should however be particularly true for individuals from the lower social strata for whom rent-seeking behavior in the form of corruption is a more salient problem. We expect individuals from the middle and upper classes to be more concerned about capacity. Employing cross-sectional survey data from the Afrobarometer for 31 countries from Sub-Saharan Africa from 2011-2013 we are able to disentangle the effect of these two factors. We find that perceived corruption reduces acceptance for the state as legitimate collector of taxes. The findings support our intuition regarding the variability of the effect: especially the less educationally privileged have significantly lower acceptance for the state as collector of taxes when corruption is widespread. In contrast to our expectation, the incapacity effect is, however, greater in magnitude for the average individual compared to corruption. When confronted with incapacity, tax legitimacy decreases at a faster rate.


Is informal work eroding compliance? 

Sarah Berens (University of Cologne) and Irene Menéndez (Mannheim University)

(forthcoming in edited volume)

In this contribution we ask how labor informality affects compliant behavior in state-society relationships with a particular focus on taxation. Compliance is understood as the adherence to tax regulations and thus, the payment of legally defined tax rates. What sounds as a tautology at first sight is a much more complex set of notions. The scholarly debate so far overlooks the heterogeneity within the group of informal workers. When informal labor is understood as work without the payment of income taxation or social security contributions, it cannot automatically be equaled with general non-compliance with the fiscal contract. Especially since informal hiring is frequently decided at the employer side, individuals who find themselves involuntarily in informal employment cannot be understood as deliberate tax evaders. Informal employment bears, however, the hazard that individuals turn into low-complying individuals as they attribute responsibility to the state for their status as informal, unprotected, workers. Such a negative effect of informality on tax compliance could erode the fiscal contract and explain low levels of tax revenue in developing countries. We therefore disentangle at the theoretical level how formal versus informal workers differ in tax compliance behavior and theorize based on the scholarly work on tax compliance and labor market dualization if, zooming in at the group of informal workers, voluntary versus involuntary informal workers are distinguishable in compliance with tax regulation and other collective actions.