Equal Treatment and the Inelasticity of Tax Policy to Rising Inequality

Abstract

We argue that tax policy typically does not respond to inequality because many voters hold equal treatment fairness beliefs for which the expectation is that, just as all have one vote, the state should treat citizens equally on other dimensions of policy. In the tax domain, this means all should pay the same rate. We propose a new survey instrument to measure equal treatment beliefs and implement it in surveys in Germany, the United Kingdom, and the United States. We document in all three countries a robust negative partial correlation between the strength of individual equal treatment beliefs and preferences for higher taxes on the rich. We also present results from a survey experiment in the United States that exposes respondents to a violation of equal treatment beliefs—voting weighted by educational attainment. Exposure to this treatment both increases the strength of equal treatment beliefs and decreases support for progressive taxation.