Taxes and Fiscal Sociology

This article reviews recent research in fiscal sociology. We specifically examine contributions to the study of taxation that illuminate core issues in the sociology of contemporary capitalism, including the causes of poverty and inequality in rich countries and of inequality between rich and poor countries. Research on developed countries suggests that tax policy changes are important for explaining rising income inequality, tax policies may structure durable inequalities of race and gender, and earnings-conditional tax subsidies may alleviate poverty more effectively and with less stigma than means-tested social spending. Scholars also find the most generous welfare states rely the most heavily on regressive taxes, although there is disagreement over how this association arises. Comparative research on developing countries shows consumption taxes are more conducive to growth than taxes on income, tax-financed spending benefits growth if it is spent on productive investments, and taxation strengthened democracy and state building in medieval and early modern Europe. However, there is disagreement as to whether taxation contributes to state building in contemporary developing countries and whether foreign aid undermines democracy by undermining taxation. These questions are the focus of considerable current research.