15 September 2021
Study looks at the factors behind support over tax cuts for wealthiest
Why do a significant number of ordinary Americans support tax cuts for the rich – and what may change their minds?
Research has consistently shown that, although most Americans oppose tax cuts for the richest one per cent, a significant minority support the idea. This is despite evidence of rising inequality and growing disparities between the wealthiest and the rest in society.
In an effort to answer this question, a group of researchers from King’s College London carried out a survey with 3,000 Americans, to measure their preferences and see what factors, if any, could change those preferences.
The researchers, Dr Julian Limberg, Dr David Hope and Nina Weber, randomly divided their subjects into five groups for the survey experiment. Each group received a short statement and a simple column chart.
The control group received factual information on the longest rivers in the United States while the four treatment groups received factual information relating to potential drivers of preferences for tax cuts for the rich. These drivers were unenlightened self-interest, the importance of fairness considerations, prospects of upward mobility, and trickle-down effects.
Key for the researchers was the desire to test the ‘unenlightened self-interest’ theory, in which it is said that a preference for tax cuts for the rich is driven by individuals’ misperceptions about the benefits they will obtain from such a policy change. In other words, ordinary Americans are simply ignorant about their own exposure to tax cuts for the rich.
The researchers, from the Department of Political Economy at King’s, said: “We found no evidence that support for cutting tax rates on the rich can be explained by individuals being ill-informed. Our results suggest that individuals typically know whether they are exposed to changes in taxes on the rich. Informing them that they were not paying the top federal income tax rate did not reduce their support for cutting it.”
However, there was evidence to show that information that posed a shock to people’s beliefs about whether the rich deserve their income, as well as informing individuals that taxes on the rich have been dramatically reduced in recent decades, did alter people’s preference for tax cuts on the highest earners.
The fairness-based treatment alone, in which subjects were told that 122 American billionaires who inherited their wealth had more money than the bottom 50 per cent of the US population, reduced support for tax cuts by five percentage points.
These two pieces of information also resulted in an increased appetite to increase taxes on the rich. The effects were particularly acute on those who identified as Republican voters.
The researchers added: “Our results are in line with a growing body of experimental work that finds fairness considerations are a crucial influence over preferences for redistribution and tax policies, whereas they show no support for explanations that focus on individuals misperceiving their exposure to changes in tax policy.
“Our findings also emphasise the importance of reference points in the formation of preferences for taxing the rich.”
You can read more about the study here.