Taxation and the Quality of Government

Abstract In this chapter we explore the connection between taxation and quality of government. Taxation represents an important interaction between citizens and the state, thus the way in which tax policies are organized has important implications for the quality of government. The first part of the chapter describes three different perspectives on quality of government: The first relates to administrative impartiality, the second to state size and economic growth, and the last to democracy. It then explores how each perspective holds distinct prescriptions for the design of tax policy. The latter part of the chapter applies the conclusions on the three perspectives to discuss exemplary cases of each over different historical periods. It concludes with a discussion of path dependence and the difficulty of maintaining a high quality of government in the long run.