Divisions among the poor: A survey experiment of tax preferences in liberalizing Brazil

Abstract

Despite globalization’s distributional impacts, we know little about (potentially differential) tax preferences of trade winners and losers, especially within social classes. We assess tax burden preferences to sustain public good provision using a vignette experiment with randomized tax instruments in the context of a liberalizing economy. More specifically, we analyze data from an original, randomized household survey of 1008 individuals in Sao Paulo State, Brazil, in 2019. We study preferences for increases in personal income, value-added, or corporate income taxes to improve funding for the universal health care system after Brazil adopts its free trade deal with the European Union. Findings reveal that the trade-losing poor support progressive taxes, whereas the trade-winning poor favor regressive instruments. By dividing the poor, globalization may create a barrier against more progressive fiscal strategies in emerging economies.