Payday and Public Opinion toward Taxation

Abstract

AbstractIf citizens pay insufficient attention to tax policies or cannot figure out how they are taxed, politicians may raise taxes more than is desired by the public, with few electoral repercussions. This scenario is central to the notion of “fiscal illusion” and is potentially problematic from a democratic point of view. In this article, I argue that payday is an opportunity for citizens to update their tax preferences. When people are paid and taxed, they are likely to think more about personal consumption relative to public consumption and be more aware of how the current tax system affects their personal finances, leading to increased tax skepticism. Studying this in Denmark, where payday falls on the same day for most people, and using a temporal regression discontinuity design, I find that support for tax cuts goes up by approximately 10 percentage points at payday. Further analyses suggest that this result is not driven by narrow economic self-interest, because the effect does not systematically vary across income groups. Rather, payday seems to mobilize ideological predispositions, as the effect is largest among rightists, for whom taxes are an especially strong political symbol. The implications for opinion formation and democratic accountability are discussed.