Fiscal Patriotism: Taxes and Catastrophe in Chilean History

Magdalena Gil

Presented at the Eastern Sociological Association Annual Meeting, “As Time Goes by: Social and Institutional Change.” February, 22 – 25, 2018. Baltimore, U.S.A.  

Abstract

The idea that crises are favourable moments to introduce major policy or institutional changes has often been stated by scholars. However, socio-natural disasters have not been included in these analyses, even though it is clear that they stress institutions to a great degree. In this paper we explore this issue and show that disasters are a window of opportunity to important institutional changes in general, and the development of taxing capacity in particular. In this line, there is a vast literature that explores citizens’ willingness to comply with new tax payments during wars.

This relationship has been explained in the form of fiscal patriotism, understood as a demonstration of consent to new revenue demands due to a feeling of devotion to one’s country. In this paper we show that a similar dynamic occurs in the aftermath of disaster. For this, we use historical methods to explore the case of Chile, a country that has been affected by several catastrophes in the past century, each one followed by important tax modifications. Our findings indicate that there are two mechanisms to explain this relationship: first, recovery demands money, and this often mean greater state intervention. Second, we describe the emerging of a new sense of patriotism that justifies tax reforms in the name of solidarity. However, we also show that, in the case of Chile, much of the changes have had little impact in the overall tax structure, with limited power to tax high-income groups, and a historical preference for indirect taxes.