The construction of the (poor) Mexican tax State

Abstract

The Mexican state is a poor tax State. Its low tax collection problem is not new but rather has historical roots. This article shows how regressive and low-extractive tax institutions were established during the processes of both state-building and alliance reconfiguration between the state and the economic elite after the Mexican Revolution. The decades after the Revolution displayed the tension between two latent alliances to guide the country’s development: the ‘progressive alliance’ and the ‘alliance for profits.’ The tax policies analyzed here expose the tension between state factions and the economic elite and show the gradual strengthening of the elite. Archival findings allow me to reconstruct the decision-making processes of the most important tax policies of the 1925-1964 period, and the actors that influenced these processes. This lends support to the proposition that the adoption of an alliance for profits in the tax domain was intended to incentivize the industrialization of the country but at the cost of building a regressive and low-extractive tax state.