This chapter will present the cases of three western European countries to illuminate the cross-national variation in tax and welfare policies. Following a summary of the limited impact of the common market integration and the persistent cross-national variation, each country's case will demonstrate that the variation resulted from the distinct paths of the formation of state funding capacity and the timing of the institutionalization of regressive taxes.

Variation in Welfare and Taxation

The Limited Impact of Common Market Integration

Europe is not unified. Policy coordination always faces obstacles from domestic political constraints from common market member countries. For example, coordinating the level of entitlements and benefit provisions in each country was far more than a technical problem that involved harmonization of the existing programs across borders. Among new or recent common market member countries outside Western Europe, as the adoption of the Social Charter in 1989 symbolizes, integration caused an increase in the level of welfare provision. For the Western European countries, however, the problem was the size of the welfare state, which had already become enormous. As monetary integration became more of a reality, the fiscal policy requirement became more explicitly politicized: the Western European countries were required to finance social security spending under the Maastricht limit on budget deficits. In this regard, integration was likely to tie government hands to manage the public sector and finance the welfare state so as to repress both budget deficits and public spending; cross-national variation persists in welfare provision among Western European countries.