Why do (some) ordinary Americans support tax cuts for the rich? Evidence from a randomised survey experiment
What is this research about and why did you do it?
One of the most enduring political economy puzzles of the past 40 years in the United States is why so many ordinary Americans support tax cuts for the rich. For instance, a third of Americans supported President Trump’s 2017 Tax Cuts and Jobs Act, despite it disproportionately benefitting the top 5% of the income distribution. Continued support for this policy is even more baffling given recent decades have been characterised by substantial reductions in taxes on the rich and rapidly rising inequality, especially at the top of the income distribution. Our paper aims to unpack this puzzle by providing new experimental evidence on what drives Americans’ preferences for cutting the top rate of federal income tax.
How did you answer this question?
We ran a randomised, online, information-provision experiment, embedded in a representative survey of around 3,000 Americans. Our subjects were randomly divided into five groups for the 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. The four treatment groups received factual information relating to potential drivers of preferences for cutting taxes on the rich identified from the previous literature, namely (1) unenlightened self-interest; (2) fairness considerations; (3) prospect of upward mobility; and (4) trickle-down beliefs. We then estimated the effects of our information treatments on support for cutting the top rate of federal income tax.
What did you find?
We found that preferences for cutting taxes on the rich were fundamentally altered by information that shifted citizens’ core fairness beliefs (i.e., informing respondents of the number of billionaires in the US that inherited their fortunes), as well as information on the past trajectory of top tax rates (i.e., informing respondents that top income tax rates were considerably higher in the past — as we do in the trickle-down treatment). In contrast, we found no evidence in support of the unenlightened self-interest or prospect of upward mobility explanations.
Treatment effects on support for cutting the top rate of federal income tax. Model with full battery of covariates. USI = unenlightened self-interest; Fair = fairness considerations; POUM = prospect of upward mobility; and Trickle = trickle-down beliefs.
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. Furthermore, our findings stress the importance of reference points in the formation of preferences for taxing the rich. In contrast, we found no support for explanations that focus on economic self-interest. Choices about redistributive decisions affecting the top of the income distribution seem to be primarily driven by other-regarding rather than self-centred preferences.
What implications does this have for the research on wealth concentration or economic inequality?
Falling top income tax rates have been closely linked to rising income inequality, especially at the top of the income distribution. This paper provides a better understanding of what underpins the support of (some) ordinary Americans for cutting taxes on the rich. From a policy perspective, it also provides evidence that voters’ preferences for taxing the rich can alter if they are presented with the right information. For a policymaker looking to reduce support for cutting taxes on the rich, our results suggest they should highlight the large role that inherited wealth still plays in determining who is rich in the US, as well as informing voters that taxes on the rich have fallen dramatically in recent decades.
What are the next steps in your agenda?
We plan to follow up this paper by using similar experimental methods to explore preferences for inequality-enhancing packages of tax cuts (rather than looking at a single tax on the rich, as we did in this paper). More specifically, we want to look at whether underlying opposition to inequality-enhancing packages of tax cuts is mitigated when ordinary citizens receive a small personal benefit (as is often the case with major packages of tax cuts that disproportionately benefit the rich such as the Bush tax cuts in the early 2000s).
Citation and related resources
This paper can be cited as follows: Hope D., Limberg, J., and Weber, N. (2022). 'Why do (some) ordinary Americans support tax cuts for the rich? Evidence from a randomised survey experiment.' European Journal of Political Economy, 102349.
- Julian Limberg and David Hope discuss their wider research on tax cuts for the rich (that also touches on this paper) in the LSE IQ podcast 'What's the future of capitalism?'