Preferences for funding particular government services from different taxes

Abstract

Five studies investigated New Zealanders’ preferences for funding particular government-provided services from different types of tax: flat and progressive income tax and flat consumption tax. Respondents preferred progressive to flat income tax when the service was relatively cheap, and when it was perceived that rich people benefited more from the service. They preferred to fund more expensive services and those perceived as more valuable or vital from income rather than consumption tax, regardless of whether the income tax was flat or progressive. The relative funding preferences for income and consumption tax were correlated with the perceived relative predictability of revenue from the two taxes and the perceived likelihood that the government might change them, but not to respondents’ ideas of how much revenue is obtained from them.