Tax principles, policy feedback and self-interest: cross-national experimental evidence on wealth tax preferences

Abstract

Rising wealth inequality and squeezed public budgets has brought wealth tax back into policy discussions. A net wealth tax might help to boost state revenue and reduce wealth inequality. Yet little is known about citizens’ attitudes towards the design of a net wealth tax (i.e. the tax unit, exemption and rate). Using a novel multifactorial survey experiment, we examine citizens’ endorsement of fundamental principles of taxation. Building on policy feedback theory, we examine if preferences differ in three policy arenas (USA, Germany and UK) and whether individuals’ reasoning is dependent on self-interest. While a clear majority in all three countries generally endorses a wealth tax, our findings show that citizens care more about the amount exempted than the tax unit or rate. We do not identify a preference for any specific tax unit. Furthermore, tax preferences seem to be strikingly similar among citizens of all three countries. Yet we show that individuals are mostly concerned about not being personally affected by such a tax, which is reflected in their preference for substantial exemptions. We discuss our findings with regard to our understanding of wealth inequality, tax equity and the potential implications for policymakers.