The rest of the paper is structured as follows. In the next section I develop
the theoretical framework. In subsequent sections, I trace the historical
record of the tax regime and show how my model can explain it. The
second section focuses on the regime’s founding period from the 1920s to
1950s. The third section shows how the regime setup endogenously creates
under-taxation and that, while actors could foresee this consequence,
they decided not to address it at the onset but to wait until it became
pressing. The fourth section analyzes the attempts to shore up the DTA
regime against under-taxation. In the fifth section I consider alternative
explanations. The conclusion provides a summary of my findings and a
brief discussion of their implications for future research.