Economic Inequality, War Finance and the Pursuit of Tax Fairness

Abstract

It is widely acknowledged that a fair tax system is one of the most crucial foundations for any country to pursue stable development and human values. So how does a country accomplish tax fairness? This article argues that war finance and domestic economic inequality are two critical conditions. Historically, wars usually create opportunities for countries to enact progressive tax reforms. However, countries’ war finance choices are conditioned by domestic economic inequality. When inequality is low, the political leadership is more likely to secure a consensus of ‘equality of fiscal sacrifice’ between domestic wealthy elites and ordinary citizens. As a result, the leadership can more successfully enact progressive taxation, money creation and non-military spending cuts to pay for the war. Conversely, when inequality is high, the societal redistributive conflict could be more serious. Unable to strike a bargain of fiscal sacrifices without severe social instability, the leadership is expected to resort to a debt-financing strategy, which stifles tax progressivity and fairness. This article compares the United States’ war finance in the Korean and Vietnam Wars and finds supportive evidence. This article has important implications for the pursuits of tax fairness, democratic accountability, and the prospect for peace.

State Regulator’s Role in the Country’s Banking System During Wartime

“…In terms of the complexity of the solution regarding the post-war recovery of the banking sector, this thesis is confirmed by the previously obtained results of Kern and Schnyder [28] on network connections between the financial sector and the real sector of the national economy in the context of attracting financing as part of the post-war recovery of the state. This study develops the previously obtained result of Chang [29] on the need to take into account the strategic task of balancing development goals as regards different stakeholder groups in relation to the operation of the banking system during wartime and during the post-war period.…”

“…This issue is developed by Kern and Schnyder [28], who study the factor of corporate network connections in the banking sector in the context of attracting financing by real sector companies during post-war recovery using the example of Great Britain. Chang [29] examines the issue of stimulating socioeconomic development and achieving development goals in the context of financing military operations using the example of the United States. The works referred to above were used in this study in the context of focusing the priorities of the state's work in the banking sector in the context of post-war recovery.…”

Перспективи Післявоєнного Відновлення Фінансового Сектора України

“…Authors [4] emphasizes the function of the international financial sector in preventing conflict. Chang [5] examines the relationship between economic inequality, wartime finance, and tax pressures. The researcher, in work [6], analyses the role of wartime finance, focusing on the functions of the Treasury in times of conflict, particularly emphasizing the importance of maintaining economic stability through monetary instruments such as currency issuance, interest rate regulation, and public debt management.…”