Class-Based Taxation: The Fiscal Paternalism of the Chilean Income Tax?

This article analyses the history of the Chilean 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. Within Latin America and in the context of a traditional association between income taxation and state development, we show how a successful case of state development rested on indirect taxation. By keeping the PIT class-based, allegedly to protect workers, fiscal citizenship failed to develop. In contrast, we develop a theory of paternalistic taxation to explain the ambiguous relationship between elites and direct taxes.