To misuse Marx’s often quoted phrase: governments are in love with tax revenue but ‘the course of true love never did run smooth’. This failed romance should be of concern to those of us who prioritise egalitarian economic outcomes, because taxes and benefits can substantially mitigate the effects of poverty. Among OECD countries, differences in tax and benefit regimes are vital in accounting for differences in poverty rates. After the benefits of tax and welfare are taken into consideration, ‘market poverty’ in north European economies declines by around three quarters, whereas in the US this declines by only one-quarter. For low income economies the development of an effective tax regime can therefore be of great benefit to the working and non-working poor.

Written by Ilan Strauss, a researcher at the Corporate Strategy and Industrial Research unit at Wits University where he also lectures introductory econometrics. Ilan has worked as a researcher for the Overseas Development Institute (ODI) in London on issues relating to trade and investment, and capital flight.

Published by Global Labour Column and edited by CSID at Wits University.