Flatliners: Ideology and Rational Learning in the Diffusion of the Flat Tax

This finding contributes to the literature on diffusion and the ability of policies as well
as ideas to cross borders, a topic that has been of concern to social sciences in the past
several decades and has recently been tackled by political methodologists.⁴ We also join
the emerging literature on the determinants of policy diffusion.⁵

Note that we leave aside analyses of the impact of the flat tax on individual and state
welfare, on the distributive implications of a flat tax, or on the merits or demerits of
tax competition. Our goal is to focus on the flat tax as a policy instrument, and as an
example of policy reform that was transmitted intraregionally rather than externally —
unusually for countries in transition, where reform measures are often undertaken at the
behest of the EU or an international financial institution. Thus, we seek to understand
the implementation of the flat tax in the broader context of influences on policy reform,
both exogenous and ideological (Williamson, 1994; Haggard & Kaufman, 1990; Rodrik,
1996; Swank & Steinmo, 2002; Swank, 2006).

Also, because of the region of focus, our work sits most comfortably in the strain of
recent literature that seeks to use taxation as a means of understanding the nature of
the modern state and its authority over its citizens (Bates & Lien, 1985; Tilly, 1975).
Marginal taxation rates in general are a widely used proxy for the overall direction of
fiscal policy (Lieberman, 2002). For developing countries, many of which suffer from weak
state capacity, this is a particularly salient concern, and many researchers in comparative
politics have focused on governments’ ability to extract revenue from its citizens, as a
⁴For just a few examplesn economics, see Axelrod (1986); Bikhchandani, Hirshleifer & Welch (1992).
In political science, see O’Loughlin et al (1998), Tam Cho (2002); Gleditsch & Ward (2000, 2006); Beck
et al. (2006); Franzese & Hays (2006); Darmofal (2006).

⁵See Simmons & Elkins (2004); Brune & Guisinger (2006); Volden & Shipan (2006); Lutz & Sikkink
(2000). Most saliently, in a recent paper, Swank (2006) investigated the dynamics of diffusion of the
neoliberal tax policies in the OECD countries and found that highly visible tax reforms in the U.S. were
important in instigating subsequent tax policy diffusion, but policy changes were constrained by domestic
politics and political economy structures.

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