Democratic reversals and the size of government

While the fiscal and redistributive consequences of democracy is one of the central debates in political economy, most empirical studies analyze this question solely in the context of transitions to democracy. In this paper, we explore the consequences to taxation of democratic reversal using the systematic disenfranchisement of African Americans in the US South between 1880 and 1910. Following the federally-imposed extension of the franchise to the former slaves during Reconstruction (1865–1877), Southern states erected a series of legal restrictions, such as literacy tests and poll taxes, aimed primarily at preventing Southern African Americans from registering to vote. Using an original dataset of local and state taxes and a difference-in-differences estimation strategy, we demonstrate that the adoption of literacy tests for voting eligibility in each state was followed by a significant decline in tax revenues that is highly correlated to the share of each county's population who was African American. We also find that black disenfranchisement led to a shift of the tax burden onto urban counties and a greater reliance on indirect taxation. Our results survive a battery of robustness checks, alternative specifications and additional tests of the redistributionist thesis. The findings are not only consistent with standard models of redistribution following democratization, but also indicate that the elasticity of taxes with respect to enfranchisement is substantial and larger than the one suggested by the cross-national literature.