Tax Revenue
Comparing Mexico’s tax revenue statistics with those from Chile, the only other OECD member in Latin America, reveals the regressive nature of the country’s fiscal policy. Consider for instance, that taxes on immovable property (impuesto predial) in Mexico tallied 20 USD/capita in 2017 vs Chile’s 103 USD/capita and that the South American nation has no payroll tax.
Payroll taxes, by definition, do not confer entitlement to social benefits and are used to finance general government expenditure and investment.
In Mexico, payroll taxes (Impuesto Sobre Nómina or ISN) are calculated as a percentage of payroll, rather than being a fixed amount per employee, and are approved and collected by legislative and executive branches at the state level.
In 2006, 35 years after first being introduced in the State of Mexico, the totality of Mexican states had adopted an ISN. By the turn of the century, they were the largest source of revenue for this level of government and state finances have become even more dependent on the ISN after the wrongheaded decision in 2007 to go ahead with reductions in the motor vehicle ownership tax (tenencia).