The Early Modern Origins of Contemporary European Tax Systems

Abstract

What explains variation in tax outcomes? Many studies emphasize the role played by institutions, focusing on those of relatively recent times. We argue that contemporary tax systems have deeper institutional origins in the early modern period when states undertook reforms to centralize and rationalize taxation. We argue that the varying outcomes of these reforms map onto contemporary tax outcomes through the mechanisms of state capacity and social norms. Where states succeeded in introducing more comprehensive reforms they developed higher capacity to extract more tax, more equitably, and developing direct fiscal contracts with social groups below elites, fostering norms of trust. We test our argument using the extent of cadastral registration of land in the early modern period. We find that on average countries where reforms were more extensive have higher tax revenues, state capacity and trust in state authorities today than countries with limited early modern tax reforms.