Class-based taxation: the fiscal paternalism of the Chilean income tax?

Abstract

This article analyzes the history of the Chilean personal income tax (PIT) to explain the persistence of a class-based and progressive PIT within a context of a regressive fiscal system. We provide new archival evidence regarding fiscal politics since the nineteenth century to estimate the generalization of the PIT between 1925 and 2014. Combining statistical information and parliamentary records, we follow the PIT’s trajectory in relation to elites’ self-interest, paternalistic understandings of the fiscal pact and citizenship, and the looming presence of natural resources. By keeping the PIT class-based, allegedly to protect workers, fiscal politics defined citizenship through expenditure instead of taxation. Those excluded from income taxation bear the brunt of indirect taxes—which support social spending—albeit without voice over fiscal policies.