Public support for broad-based taxation risks eroding when voters learn that the super-rich pay lower tax rates than ordinary citizens, according to new research co-authored by King's academics.
While it is well established that voters typically demand higher taxes on the rich when they are exposed to inequality, the new research highlights a potentially more dangerous consequence for government revenue: a significant drop in the willingness of voters to tax the middle class.
The findings were published by Dr David Hope and Dr Julian Limberg, from King's College London, and Dr Lukas Haffert, from the University of Geneva.
In an experiment involving about 4,000 people in the United States, respondents were shown data revealing that the top 400 richest individuals pay a lower total tax rate than those on much lower incomes.
People informed about the imbalance at the top not only subsequently demanded tax hikes for the wealthy but also significantly reduced their support for taxing median income earners.
The researchers said the reaction was driven by a crumbling sense of fairness. When the tax system is perceived as violating basic fairness norms, citizens become less willing to contribute, potentially undermining the fiscal consent needed for governments to fund public services.
The findings reinforced evidence that tax policy preferences are not just driven by economic self-interest but are also heavily shaped by a sense of fairness.
The authors said: "Taken together, the results of our study highlight an important hidden cost of tax regressivity at the top: if left unaddressed, it could risk undermining public support for the broad-based taxation that forms the backbone of governments' fiscal capacity."
