The history of modern state development is inseparable from the history of taxation. The capacity to extract resources from society allows the state to finance and expand its activities and create a modern public infrastructure. A watershed moment in this development is the adoption of personal income taxation. This so-called “queen of taxation” (Popitz 1926) is far superior to traditional forms of taxation such as real estate taxes, poll taxes, or window taxes in terms of efficiency and coverage. Today personal income taxation contributes the largest share of all tax sources to the public budget in almost all Western societies.
Yet we know very little about the origins of personal income taxation. Historical analyses have highlighted the important role of military conflicts (e.g. Tilly 1975). Recent quantitative analyses have confirmed this finding. However, this new research has also highlighted a series of important puzzles such as the surprising non-linear relationship between suffrage extension and the adoption of personal income taxation (Aidt and Jensen 2009; Mares and Queralt 2015). What is more, surprisingly little is known about other political sources and processes that drive the adoption of personal income taxation, including the role of domestic political variables such as political competition, the role of sectoral economic interests, or the role of diffusion processes.
The goal of this project is to explore the political origins of the most important source of funding for the modern state, and thus an important determinant of state capacity, and thereby to shed light on how one of the most relevant prerequisites for the modern state came into existence. The project will analyze cantonal variation in the adoption of personal income taxation from the early 19th century until 1970 (the year the last Swiss canton, Glarus, adopted personal income taxation).
There are several reasons for analyzing subnational data. Most importantly, by analyzing subnational data some of the problems that complicate the analysis of cross-national data can be avoided, in particular the small number of cases (existing research typically relies on between 10 and 17 cases), the existence of federal states (in which the central state does not have the right to levy income taxes), and widely different political and economic contexts at the time of adoption (e.g. the Austrian Empire introduced personal income taxation in 1849, Denmark after a process of democratization in 1903, and Weimar Germany following World War I in 1920). In contrast, cantonal variation (e.g. with regard to suffrage extension or economic structure) combined with its comparatively ‘calm’ political history make Switzerland the perfect case to examine the role of domestic variables in the adoption of personal income taxation.
The difficulty with research on political processes in the 19th century lies in the accessibility of data. Hence, we place a particular emphasis on data collection. Data for some variables, such as population size, can be collected centrally. Data for other variables, however, can only be collected in cantonal archives. In terms of output, this project promises to contribute to an ongoing research debate on modern state building, the development of state capacity, and in particular the adoption of personal income taxation. Next to publications, the collected data, upon completion of the project, will be made publicly available through public archives as well as personal websites. Given the recent interest in historical data on democratization processes, state building, and state capacity, this project therefore promises to make an additional contribution to the scientific community by making available new economic and political data on Swiss cantons, which can be widely used in a large variety of contexts and different disciplines.