The total wars of the modern era triggered the expansion of redistributive taxation in the West, contributing to an unprecedented decline in economic inequality. After 1945, armed conflicts have continued to ravage mainly low- and middle-income societies. Disparate in appearance, these contemporary conflicts, including civil wars, led to the same dire fiscal pressures and inequitable socio-economic outcomes as their historic predecessors. Yet their impact on tax policy has until now remained opaque.
Drawing on the historical experience of the West, a more general theory of the positive link between war and redistributive taxation is developed, based on three complementary causal pathways. War-time tax-increases are driven by revenue needs; facilitated by citizens’ fiscal patriotism; but crucially skewed towards the rich by popular demands for fiscal fairness, induced by the inequities of war itself.
To test these arguments, I analyse original data on war-time taxation through a mixed methods research design. First, the causal effect of conflict on redistributive taxation is estimated through an econometric analysis of yearly data on top personal income tax rates, collected for a quasi-exhaustive sample of 61 conflict-affected countries over six decades. Extending the analysis, the introduction of designated war taxes – a particularly informative subset of war-time taxes – across the contemporary world is mapped and analysed through comparative statistics and micro-case studies. Finally, two single case studies – one primary (Croatia) and one auxiliary (Syria) – are studied in-depth with a particular focus on causal pathways and conditional factors.
The results show that contemporary armed conflicts have led to exceptionally redistributive taxation, no less so than in Western history. The link, however, disappears after the Cold War. With the initial conditions persisting, an array of evidence indicates that this was a direct result of the post-Cold War macro-political shifts, leading to the expansion of the neoliberal paradigm and the emergence of increasingly powerful conflict-elites, both erecting barriers towards progressive taxes.