Francisco Madero entered Mexico City on June 7, Francisco Madero was elected president on October 15, , and he was inaugurated as president on November 6, Emiliano Zapata, originally a supporter of President Madero, led a rebellion against the government in southern Mexico beginning on August 30, Pascual Orozco led a rebellion against the government in northern Mexico beginning in March , but government troops commanded by General Victoriano Huerta suppressed the rebellion in October The US imposed military sanctions arms embargo against the government and rebels on March 14, General Felix Diaz led a rebellion against the government in Vera Cruz beginning on October 12, , but the rebellion was suppressed by government troops on October 23, President Francisco Madero was overthrown during a Conservative counter-rebellion led by General Victoriano Huerta on February , , resulting in the deaths of more than 2, government soldiers and civilians.
The US imposed diplomatic sanctions diplomatic non-recognition against the government of General Huerta on February 18, General Huerta arrested the members of the Chamber of Deputies on October 10, , and established a military dictatorship on October 11, The US lifted military sanctions against the government and rebels on February 1, General Huerta was elected president on July 5, , but he resigned on July 15, Francisco Carbajal was appointed as provisional president on July 16, Some 80, individuals were killed during the rebellion.
Rebel troops commanded by Pancho Villa captured Mexico City, but government troops commanded by General Alvaro Obregon re-captured the capital on January 27, Some 5, rebels and 1, government troops were killed in the Celaya battles. The US provided diplomatic assistance diplomatic recognition to the government of President Carranza on October 19, , and Britain provided diplomatic assistance diplomatic recognition to the government on November 16, The US imposed military sanctions arms embargo against the rebel groups on October 20, US troops clashed with rebel soldiers at Parral in the state of Chihuahua on April 12, , resulting in the deaths of some Mexicans.
President Carranza condemned the US intervention in June US and Mexican government troops clashed at Carrizal on June 21, A constitutional convention convened on November 21, , and a new constitution was approved by the constitutional convention on January 31, US troops completed their withdrawal from Mexico on February 5, 30 US soldiers were killed during the intervention.
The constitution establishing a federal republic went into effect on February 5, President Carranza was re-elected to a four-year term on March 11, Some 1, rebels led by Pancho Villa briefly captured Chihuahua on November 25, Emiliano Zapata was killed in an ambush by government troops led by Colonel Jesus Guajardo on April 4, The US imposed diplomatic sanctions diplomatic non-recognition against the military government on May 22, Adolfo de la Huerta was appointed as provisional president on May 25, Pancho Villa surrendered to government troops on July 28, he was later assassinated by Jesus Salas Barraza in Parral on July 20, Some , individuals were killed during the conflict.
Post-Conflict Phase July 29, July 31, : General Obregon was elected president on September 5, , and he was inaugurated as president on November 30, The US provided diplomatic assistance diplomatic recognition to the government of President Obregon on September 3, The US provided military assistance to the government in January The government suppressed the rebellion on February 6, , and Adolfo de la Huerta went into exile to Florida on March 12, Some 7, individuals were killed during the rebellion.
Plutarco Elias Calles was elected president in July , and he was inaugurated as president on November 30, The government ordered the arrest and deportation of foreign Roman Catholic priests on February 11, On April 21, , Roman Catholic bishops in Mexico condemned the provisions of the constitution concerning the Church. Some 7, individuals were killed in political violence between July and July The US imposed military sanctions arms embargo against the government.
Alvaro Obregon was elected president on July 1, , but he was assassinated by Jose Toral on July 17, Emilio Portes Gil was appointed as provisional president by the Congress in September Some 35, government troops suppressed the rebellion on May 4, Some 2, individuals, including 1, rebels and government soldiers, were killed during the rebellion.
Ambassador Dwight Morrow of the US mediated negotiations between the government and Cristeros rebels in Havana, Cuba beginning in January , and the parties agreed to peacefully resolve their dispute on June 21, The US lifted military sanctions against the government on July 18, On September 20, , the Cristero rebellion ended after the government agreed to end its persecution of the Roman Catholic Church.
There was enmity between the two characters Collado, , p. This event certainly had negative repercussions for the fate of the property tax. Given that the initial proponent of the property tax had resigned, the defence of the new tax was left to Pani, whose commitment was in question. Pani decided to push the issue of the FPT later yet on the agenda. He granted a 3rd deferral of the deadline for property declarations to the end of December and called a cadastral convention to discuss the creation of the national cadastre with state representatives.
The opposition groups celebrated the minister of finance's decision. The cadastral convention took place in Mexico City from the 1st to the 10th of December ; its purported aim was to define the plan for the federal and local government to work together in creating the national cadastre. The convention had originally only included governors and personnel of the MF. But due to pressure exerted by the Property Alliance some of its members were also eventually included.
In this case, Pani decided the opposite, demonstrating that under his leadership, the government was perhaps no longer interested in the success of the property tax. The pressure of members of the Property Alliance and governors against the decree changed the cadastral convention programme.
There initially had been no plan to discuss the federal property tax; however a panel on the topic was included. The cadastral convention report points out some of the conclusions reached by the panels SHCP, , pp. This document reflects an agreement on the need to align the property registries and the property taxes across states given that the tax base and rates widely varied.
The cadastral convention concluded that the cadastre had to be initially based on the taxpayer's value statements and that the commercial value of property would be the tax base on which to extract progressive rates Pani, , pp. Nevertheless, the FPT was left in stand-by and subject to the creation of the national cadastre.
The ex-minister of finance had the support of a large segment of the army; however, he lost the battle by mid Pani did not follow up on the national cadastre project as he chose instead to pursue a different project: the income tax, decreed in February The first attempt to introduce a national direct tax had failed.
The FPT was never put into practice. The income tax promised a fairer tax arrangement and more resources to the state than the prevailing system. It was also a crucial piece in the fiscal reform pushed by Pani. For him, the establishment of institutions conducive to economic growth involved four major prerequisites: balancing public finances; reorganizing the fiscal system; reactivating the banking system; and restoring domestic and foreign credit Pani, , p. The former referred to the tax system complexity and the unclear delimitation of tax powers between the different levels of government and the latter referred to the preponderance of indirect taxes in the tax system, which was, in the words of Pani, a source of injustice Pani, , p.
The income tax was projected to be the core of the tax system. The new tax offered many advantages and aligned with the liberal and progressive ideology of the time. Unlike the FPT, the income tax was seen and cleverly presented by the government as a modern, new and fair tax. On the other, the political notion of taxes stressed that citizens had to make equal sacrifices in contributing to financing the state. This principle was represented by the progressive nature of the income tax, which allowed charging higher tax rates for individuals in higher income brackets.
Adopting the income tax also went hand-in-hand with the emergence of modern states at the turn of the 20th century. Such was the case of advanced countries in Western Europe and the United States and to some extent, the case of the post-revolutionary Mexican state, which taking advantage of the constitutional foundations became more interventionist.
The role played by modern states in society was enhanced. States needed more resources to promote economic growth, provide welfare and redistribute income. In this context, the income tax was the perfect fiscal tool to aid the state. Nevertheless, the income tax awoke opposition as the new tax aimed to extract resources from previously untaxed income and taxpayers.
Moreover, it required individuals and businesses to declare their financial information. Such changes implied a clear disruption of the status quo. Elite groups had never paid a direct tax, not to mention one that implied progressive rates.
Business groups and particularly those already organized were the main opposition. In spite of this opposition the income tax was put into practice and remains to this day.
In contrast to the proprietors and landowners that opposed the property tax, the business groups were not cohesive in resisting the income tax. There were divisions within the Concanaco and between Concanaco and Concamin. The government proved to be skilful in counteracting the arguments and means used by the opposition.
Some of these measures included tax concessions, in the form of special treatment, which ultimately reduced the tax base from which to extract resources from taxpayers. But giving tax concessions was not the only tactic used to smooth the tax implementation. The government, led by the figure of Pani, a pro-business treasurer, offered financial inducements to the business sector in exchange for acquiescing to the new tax. All the above constituted a solid and effective strategy on the party of the government that facilitated the adoption of the new tax.
The next section provides evidence for these claims. The decree of the tax on wages, salaries and profits ISSU 46 established the law and regulations that were to guide its implementation. The ISSU established four groups of earners that were subject to the income tax: public-sector employees, private-sector employees, professionals, and corporations.
The four different sources of income exempted low-income taxpayers and had progressive rates. There are a few points to highlight from the ISSU law and its regulations. Some forms of income were exempt under the ISSU, including the income of the president, congresspersons, Supreme Court justices and all elected politicians. Agricultural companies were also exempted from paying. There were several municipal and state boards that were subject to the federal-level board.
Businesses and individuals had never been subject to such scrutiny before; in the past their taxes had mostly been indirect. Taxpayers, just as in the case of the cadastre, were fearful of a state capable of measuring their wealth. The business sector also used the tactic of pressing the executive to repeal the tax through correspondence.
They first argued that the economic situation was not favourable to the introduction of a tax on income and that the tax regulations were complex and difficult to comply with. Of all the different arguments used by the private sector in the press or correspondence, two were most common: that the new tax was illegal and that its progressiveness implied several disadvantages.
First, business representatives argued that the emergency powers given by the legislative to the executive were attributed only to Carranza in and these could not be extended to following executives. This argument echoed complaints voiced by the Property Alliance in opposition to the property tax.
The second claim had to do with the threat implied by a redistributive tax. Concanaco put it clearly in the following statement: The MF should only fulfil the public administration's needs, it should not try to correct the supposed injustices of the social state, particularly those derived from the unequal distribution of wealth, which after all are beyond correction given the inherent inequality of human capabilities As quoted in Collado, , p.
Moreover, business groups claimed that the tax's progressive rates were damaging to the individualist spirit on which the capitalist system is based, in turn negatively impacting economic dynamism. In other words, the business groups were using a neoclassical type of argument. Specifically, neoclassical ideas posit that taxes adversely affect savings and in consequence reduce investment.
He assured claimants that the tax had many positive attributes. It was based on the ability-to-pay principle, its rates were not so onerous as to discourage investment and the new tax would replace the stamp tax, which was considered unfair and onerous. Moreover, in order to counter the argument that the tax was illegal, Pani asked two eminent lawyers to conduct a study that evaluated the legality of the ISSU.
The report concluded that the tax was legal and fiscally recommendable Collado, , p. Clearly, the executive was handling the opposition to this tax in a different fashion than it had handled the opposition to the property tax.
The federal government had probably learned an important lesson from the FPT experience about the importance of allaying concerns of opposition groups. The opposition unity did not last for long.
Some industrialists, mainly oil companies, started to comply with the ISSU regulations and made their first declarations in August Aboites, , p. The industrialists started to cooperate with the tax under the credible threat of being sanctioned by the treasury.
The number of industrial firms was small compared to commercial businesses and their profits were larger on average. In addition, the divisions between the two most prominent business organizations, Concanaco and Concamin, were exacerbated. National industries, for instance, were adversely affected by the massive sale of imports by commercial firms, most of whom were members of the Concanaco Puga, , p. However, in , such threats were not as present, and the commercial and industrial chambers had not yet established a united front.
Moreover, Concanaco itself had internal divisions dating back to its foundation in In sum, business interests were not unified, either within or between sectors. As a result, their power to oppose the new tax was reduced.
The fragmented opposition to the ISSU represents a clear contrast with the well organized and cohesive front mobilized against the FPT. The fact that industrialists began to comply with the income tax did not reduce the belligerent attitude of Concanaco. The local chambers of commerce threatened to declare the amparo against the executive's decree, as opponents to the property tax had previously threatened.
However, the government this time responded with measures to counter the dissidents. The provision of public services, for instance, was made subject to the ISSU payment. Plutarco E. Calles took the presidency in December In fact, the naming of Calles was the main reason that the ex-minister of finance, de la Huerta, had launched a revolt a year earlier. Despite the change in the presidency there was continuity in the overall aims of balancing the budget and correcting the regressive composition of the tax system with the introduction of direct taxes.
The two taxes were in essence the same: direct taxes on income with progressive rates; however the income tax was structured in a different manner, taxed at higher rates, but above all, included some concessions for specific taxpayers.
The income tax law established a new structure for the tax. The income tax had four distinctive characteristics, which in the words of Pani made it modern and fair. It exempted those receiving lower incomes; it imposed specific treatments on the different sources of income; it set graduated progressive rates; and it granted households tax reductions Pani, , pp.
The campaign against the income tax continued after it was decreed. Business groups continued to resist. According to Hansen , pp. Such side payments may take the form of exemptions, deductions, or any other provisions that have the appearance of reducing the tax burden.
In short, the point is to implement measures that make the introduction of coercive policies, like taxation, more palatable to societal groups that otherwise would put up significant opposition.
The MF, under Pani, pursued this strategy for the income tax. Business groups, throughout the ISSU struggle, complained about the complexity of the tax code and the discrepancies between the tax law and the actions taken by institutions charged with enforcing it. In response to these complaints, the MF improved the law and regulations of the income tax; these were clearer and no longer contradictory.
In other words, the MF shared the gains with potential dissidents. In this way, the executive power was building more favourable political circumstances by minimizing opposition, a tactic identified by Hansen , pp. For her, minimizing opposition and constraining it by limiting their participation is part of the political context that is conducive to successful tax innovation.
None of these tactics were used during the FPT struggle, helping explain its demise. On the contrary, the MF enhanced the participation of the FPT dissidents when they were allowed to have voice and vote in the cadastral convention. Another way in which the MF favoured the introduction of the income tax was by not requiring taxpayers to pay rates corresponding to their total income accumulated from different income schedules.
Individuals and firms with diverse sources of income benefited from not paying taxes based on their aggregated income. Thus, although the income tax rate structure became more progressive relative to the ISSU structure of rates, its progressiveness was reduced through the exclusion of the requirement to pay rates that correspond to consolidated income.
Indeed, the income tax taxed capital revenue in schedule four, which was before not taxed and it did not exempt elected officials nor agricultural revenue as the ISSU did. Profits coming from leasing real estate, interests gained from credit unions and banks, and the revenue of banks resulting from any of the concepts taxed by schedule four were tax-free. In fact, the banking sector and insurance companies were subject to schedule one and not to schedule four as would have been more correct, given the nature of their business.
Such treatment was in practice a privilege given that it was more convenient for financial institutions to pay under schedule one Beteta, , p. Given these provisions, the financial sector put up little opposition to the income tax. It seems realistic to conclude then that an important faction of the business sector was not exerting pressure in opposition to the income tax. However, this also contributed to the formation of a porous tax system, which has characterized Mexican taxation and has resulted in persistently low tax collection.
In the year after its adoption, the income tax began to show results and more taxpayers decided to comply. In the first seven months of , the income tax revenue had exceeded the annual collection of ISSU by 3. Industrialists were among the first to pay the tax. Besides the reasons explained before, it is also likely that the industrialists did not resist the payment as much as the members of the property alliance because of two issues. Concamin was created in by Pani when he was the head of the Ministry of Industry and Commerce.
This ministry originally had the objective of smoothing the deteriorated relationship between government and businessmen after the Revolution. Along this line, Collado , p. In her view the former was characterized by a conciliatory attitude in contrast to the more belligerent position of commercial interests. Moreover, some leaders in the manufacturing sector considered the income tax fair and morally legitimate. In Levi's perspective, for instance, it is crucial that taxpayers perceive the tax deal as fair in order to achieve the voluntary side of compliance.
Levi , pp. Similarly, Hansen argues that it is necessary to make the taxpayer feel that she is bearing a fair share of the burden if the government aims to introduce a coercive policy such as taxation Hansen, , p.
Thus, the fact that there were progressive people at least within the faction of the industrialists 55 that appreciated the income tax as fair, most likely contributed to a more cooperative attitude towards compliance. However, the fact that some taxpayers started to comply with the income tax was not wholly attributable to perceptions of fairness. Business leaders, I argue, were also motivated by other incentives, such as compensation offered by the state in exchange for compliance with the tax.
Credit policy and the inclusion of business groups in consulting boards were two main measures taken by Pani that benefitted the business interests represented by Concamin and Concanaco. The lack of credit had previously been one of the business sector's main complaints to the government. It was Pani who actively put in motion the activation of the financial system, which had previously been inhibited due to the lack of a central bank. It is likely that in an effort to persuade the reticent chambers of commerce to accede to the income tax, the Pani administration eventually granted these chambers membership in the tariffs commission.
In March , the chambers had requested to have voice and vote in this mixed board that was in charge of proposing changes to tariff policies. This concession to organized commercial interests coincided with the decision on the part of Concanaco to withhold opposition to the income tax, likely because membership in the tariffs commission was granted on the condition of acquiescence. In sum, business groups, by receiving favourable financial policies and by being included in consulting boards, most likely perceived they were getting something valuable from the government, which could have been seen as a direct exchange for their going along with the new taxes.
The income tax, thus, was put into practice and persists until today. This paper explained the divergent outcomes of the federal property tax and the income tax decrees. I argued that the overall weakness of capital holders in the aftermath of the Revolution permitted the Executive to decree these two direct taxes. I further claim that successful introduction of these two new taxes would depend on the government's ability to implement three strategies oriented to compel the compliance of potential key tax-payers property and land holders, and business organizations.
The government had to convince capital holders to comply by 1 gaining credibility, particularly by convincing these groups that the MF would not raise tax rates heavily and would maintain the terms on which the taxes were decreed; 2 minimizing opposition through two tactics: limiting the political opposition's participation in tax debates and discussions, and offering side payments to reduce opposition; and 3 successfully portraying and justifying the FPT and the income tax on fairness grounds.
In the case of the FPT, the government was not effective in introducing the tax because it did not conduct any of these three strategies successfully. In addition, de la Huerta's revolt at the end of created a context of political instability, which was not conducive to the introduction of the tax. Furthermore, political opposition to the FPT was unified and highly organized in its strategy against the tax. This paper described and analyzed the FPT opposition campaign step by step, identifying the different resources and strategies used by the opposition, led by chambers of landowners and agriculturalists.
They called three assemblies to organize a united front; created an umbrella organization to coordinate, represent and act on behalf of their interests; exerted pressure through media; they constantly addressed the president through letters and telegrams asking for the repeal of the tax; they threatened the government with both, the use of the amparo and by asking United States representatives in Mexico to mediate the process; and, finally, the opposition worked together with local governors and congresses to ask the federal congress to repeal the FPT.
The income tax struggle differed in all these variables, accounting for its successful adoption. The federal government proved to be skilful in its strategy, applying basic principles, which have been shown to facilitate the introduction of coercive measures, such as taxation. The Minister of Finance strove to gain credibility for the income tax in the eyes of the business sector and to incentivise compliance by offering side payments in the form of tax concessions and special treatments to key opposition figures.
Unlike the case of the Property Alliance, the income tax opposition was divided within and between the industrial and commercial sectors, which limited their effectiveness in attempting to block the tax implementation.
The income tax resistance was fragmented and included some progressive industrialists who soon after the decree began to comply. In addition, the income tax was amply supported by the ideology of the time and the revolutionary ideals. The income tax was presented as a modern and fair tax.
It was portrayed as the way to activate the Revolution in the fiscal domain. Rodriguez Gutierrez and Henry Bruere Uhthoff, , p. After all, Carranza's government had to smooth relations with foreign investors since it needed to renegotiate its external debt..
This estimation is based on Uhthoff , pp. The executive was endowed with emergency powers to decide on treasury issues by a congressional decree passed on May 18, Box 7, File The amparo is an order for protection against the action of authorities, a very powerful provision in Mexican law.
For an analysis on the evolution of the fiscal amparo see Elizondo and Perez de Acha The alliance was made up of several groups: industrial firms; commercial firms and individuals; as well as organizations representing interests of property owners and different economic sectors such as agriculture, commerce and industry.. Box: , File: N El Universal. Nevertheless, no further evidence in correspondence or newspapers was found on the role actually played by United States representatives..
Impuesto sobre sueldos, salarios y utilidades , ISSU.. Juntas Calificadoras.. Box: 57, file: HS.. El Universal , March 28, It is to note that Concamin presented the first initiatives on the Federal Labour Law and on the creation of a social security system for workers Puga, , pp.
El Universal , April 20, ISSN:
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