Tax policy as industrial policy in comparative capitalisms

Abstract

This paper analyzes fiscal policy from a growth model perspective, with a particular focus on taxation. It argues that tax policies channel resources into specific sectors of the economy and thereby affect the distribution of market incomes. Tax policy can thus be a mid-range form of industrial policy which does not leave resource allocation entirely to the market but does also not seek to “pick winners”. To develop policies that help to rebalance existing growth models and to reduce inequality, this understanding of tax policy, and fiscal policy more broadly, needs to return to the agenda of researchers and policymakers.