Taxation and Economic Management in the Western Nations

Trends in the tax revenues of five Western nations from 1900 to 1978 are examined. As tax revenues have increased from 10 to 40 percent of gross national product (GNP), indirect taxes have proportionately declined, displaced by social insurance and direct taxes. More of the tax burden is being paid by employers; sales and value-added taxes have become more important among indirect taxes; income taxes have displaced wealth taxes among the direct tax forms. Changes in tax administration, economic impact, and the politics of taxation are examined as possible limitations on the further growth of taxation and economic management by taxation. It is argued that the marked increase in the tax/GNP ratio cannot be regarded as having a proportionate impact on the ability of governments to manage economic performance by taxes.