Abstract
It has long been argued that growing inequality would lead to growing demands for redistribution, especially from less affluent individuals who would benefit most from redistribution. Yet, in many countries we have not seen tax increases and even when ballot initiatives allow individuals to directly vote to raise taxes on the wealthy they decline to do so. This raises the question of how economic self-interest shapes voting on tax proposals, and what factors may weaken the links between economic self-interest and tax policy preferences. In the U.S. context partisanship is a factor that has a major influence on attitudes about taxation. To explore how self-interest sometimes overcomes partisanship we take advantage of competing initiatives that were simultaneously on the ballot in California in 2012. California’s Proposition 30, a successful 2012 initiative, significantly increased taxes on the wealthy. By comparing voting on Proposition 30 to voting on Proposition 38, which would have raised taxes on nearly everyone, we observe that when tax hikes are focused only on the wealthy a substantial number of lower income Republicans (i.e., conservatives) defect from their party position opposing taxation. We identify these low-income Republicans as “populists.” Lower income Republicans are also less supportive of income tax increases on the lower and middle classes, and are more sensitive to income tax increases than sales tax increases. We argue that economic self-interest causes heterogeneity within the parties in terms of attitudes toward tax increases.
Highlights
Conflict over redistribution has long been one of the main political fault lines in Western democracies
While patterns of support for Proposition 30 and 38 are similar across our three explanatory variables, it is interesting that for Democrats and independents there was a big drop off in support for Proposition 38 compared to Proposition 30, but less so for Republicans
While support for Proposition 30 was higher across the board than for Proposition 38, it is interesting that high income voters were 13% more likely to favor tax increases on the wealthy than across the board tax increases, while the gap was 9% for low and middle income respondents
Summary
Conflict over redistribution has long been one of the main political fault lines in Western democracies. We take advantage of competing tax proposals that were placed in front of California voters as ballot initiatives in 2012 to examine how the structure of tax policies affects individual support, and how economic self-interest (income) and partisanship combine to shape attitudes about taxation. Proposition 38 would have achieved similar revenue and spending goals, but been funded primarily by an income tax increase on virtually all Californians, including substantial increases on the middle class These competing initiatives on the same ballot in the same year allow us to distinguish between individuals who support or oppose tax increases regardless of their specific structure to those who oppose or support tax increases based on whether they are likely to benefit. This suggests that one reason that taxes have not increased in response to growing income inequality in the U.S and other countries is that many individuals choose not to support tax increases due to their partisanship and concerns that their own taxes may be increased, rather than any general antipathy to high taxes per se
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