Data and Code for: Employment Structure and the Rise of the Modern Tax System

Abstract This paper shows how the modern tax system characterized by high collection and redistributive capacities arises over development. I construct a new micro-database of households surveys which cover 100 countries at different income levels today and long-run time-series in the US (1870-2010) and Mexico (1960-2010). Using these data, I establish three new stylized facts: 1) the share of employees increases over the income distribution within country, and increases gradually further down the income distribution as a country develops; 2) the income tax exemption threshold moves down the income distribution as a country develops, tracking employee growth; 3) throughout development, the exemption threshold is located such that the employee-share on the tax base remains constant and high at 85-95 percent. I provide evidence to support the interpretation that a high employee share on the tax base is a necessary condition for effective taxation, due to the existence of third-party agents and information trails on employees that improve enforcement and lower administrative and compliance costs. In this setting, the rise in third-party information covered income through increases in employee-share drives expansions of the income tax base over development.<br>