Making the rich pay? Social democracy and wealth taxation in Europe in the aftermath of the great financial crisis

Abstract

Why is taxing the rich so difficult despite rising inequality and public support for progressive taxation? Recent research has mostly focused on the ‘demand side’ of electoral tax politics, showing that economic crises can increase public demands for progressive taxation in contemporary societies. Complementing this research, we focus on the political ‘supply side’, investigating the conditions under which social democratic parties take up these calls and translate them into policy. Studying wealth taxation in the course of the global financial crisis, we argue that whether parties pushed for taxing wealth crucially depended on intra-party struggles between the (office-seeking) leadership and the (policy-seeking) left wing. Only if the leadership became convinced that redistributive tax policy was electorally promising, did the social democratic parties fight for implementing wealth taxes. We evaluate this theoretical proposition in a comparative analysis of wealth tax policies in Austria, Germany and Spain in 2008–2015.