4 - Mexico

Summary

Even more than Chile, Mexico is a case of light taxation. Although its tax burden has increased recently, it remains well below the regional average. Non-tax revenue from PEMEX helps explain this situation, but it is not simply a product of reliance on oil. This chapter develops a political explanation of Mexico’s light taxation, which argues that the causal dynamics behind it are similar to the ones operating in Chile in two crucial respects. First, light taxation reflects a sustained power imbalance favoring anti-statist actors. Second, this imbalance is largely an unintentional, path-dependent consequence of efforts by a left-leaning government to redistribute property in favor of workers. The key reformist episode, which occurred during the mid-1930s, set in motion a reactive sequence whose result, strong business organization and the coming together of economic elites and social conservatives in a relatively cohesive anti-statist bloc, was subsequently reproduced through self-reinforcing mechanisms involving ideas and power. This bloc has held together under both authoritarian and democratic conditions, frustrating efforts to raise taxes and expand the public sector.