The British tax revenues increased by over three fold in the quarter of a century following the Glorious Revolution (while French revenues remained constant). Notably, these revenues were used very differently from how the marginal revenue was spent during the reign of the Stuarts before 1688: instead of financing the consumption or the retinue of the crown, they were spent to strengthen the Navy, which would then play an important role in defending the overseas interests of those in the Parliament (who in fact constituted the main checks against the power of the Hanoverian monarchs).But wasn't the levying of ship-money one of the big complaints against Charles by Parliament just before the Long Parliament? If I remember my Hume correctly, Charles levied a tax (as prerogative rather than through Parliament) to kit out a first rate navy, and Parliament, who otherwise refused to grant him adequate supply for anything, got mighty ticked off about this imposition despite it being very well used indeed. Charles, seeing the writing on the wall, gave up ship money in the lead-up to the Long Parliament, but Hume suggests ship money nevertheless as one of the spurs for the Glorious Revolution: hardly an indication that the navy was neglected under all the Stuarts.
Or does Acemoglu count ship-money as inframarginal? The marginal dollar, I suppose, under Charles would have been used trying to defend against the incursions of crazy religious fanatics from Scotland: navy not much use there. Or is Acemoglu referring more to Charles' predecessors? If the latter, then does the comparison of revenues pre and post revolution make sense?
Hume's chapter on Charles is depressing.
None of this detracts from Acemoglu's overall point though:
This paper points out why this argument needs to be qualified and why caution is necessary before increasing the fiscal capacity of the state becomes a silver bullet policy recommendation. Because the availability of more efficient means of taxation increases the potential benefits of controlling state power, it also intensifies political conflict aimed at capturing the control of the state. This indirect effect counteracts the benefits from more efficient taxation and may dominate these direct benefits; as a consequence, the allocation of resources may deteriorate when the society and the state have access to additional fiscal instruments.As Farrant and I have said before, the last thing you want is for Stalin to have more efficient means of taxation. And as I've said here before, I oppose Key making the NZ tax system more efficient (flattening out the income tax and imposing a land tax) because I don't trust Labour not to keep the land tax while re-implementing a 39% top marginal tax rate. The imposition of a new tax needs be accompanied by a commensurate increase in our ability to veto future growth in the overall size of the state. Acemoglu again:
The more general lesson is that while state capacity and states with sufficient economic strength to tax, regulate and provide public goods are essential for economic development, these benefits may not get realized by an autonomous increase in the strength of the state because this will also increase the value of controlling the state and thus induce increased political conflict and infighting. Therefore, the virtues of strong states emerge when the increase in the economic strength of the state is a consequence of, or at least happens simultaneously with, an increase in the political accountability of rulers and politicians. This underscores the need for future work investigating dynamic models of the endogenous emergence of state capacity and its relationship to political accountability.Indeed. Couple the tax change with a requirement that any future tax increases be passed by supermajority referendum (or big structural decreases in the overall size of government), and I'm all for it. Otherwise, not so much.
