PROGRESSIVE TAX REFORM AND EQUALITY IN LATIN AMERICA - James E. Mahon Jr.

The long coexistence in the region of elected governments, enormous inequality, and inattention to progressive tax- ation ought to puzzle us—and not just because it directly violates the expecta- tions of the most widely cited model of the political economy of taxation.3 The background papers and case studies of the Latin American Program’s Project on Taxation and Equality can be found at . [...] Arnson the elimination of exemptions on capital income (of people) and special cor- spending side in Mexico (the low quality of public services and the lack of porate rates; and the phasing out of exemptions and zero rates in the VAT, transparency) has led to a resilient distrust of taxation and a problem of with a personal VAT or other form of reimbursement for poor households’ tax insufficiency. [...] Spotlighting the 2012 reform under was substantially modified in concert with representatives of business and the first administration of President Juan Manuel Santos, the author finds the political right, even though the votes of the latter were not needed for that its main determinants were the government’s legislative majority, the its passage. [...] They prefer, for example, an expan- commitments, and fiscal rules limiting the size of the country’s deficit) and sion of the personal income tax base over the raising of rates on the highest sees the government’s choice of continuity in the tax system as a pragmatic incomes and argue that expanding the tax base is key to generating suffi- response. [...] During the past few decades, the governments of Guatemala that reforms of the Guatemalan tax system should be part of a compre- and Mexico have not only failed to make their tax systems more progressive; hensive fiscal pact, along the lines of the agreement reached in 2000, and but with tax revenue levels among the lowest in the hemisphere, they have should include strong controls and greater effi.