Understanding Tax Policy: How Do People Explain Why?

qjab033, https: //doi.org/10.1093/qje/qjab033

Explanation

The authors study how people understand, reason about, and learn about the major tax systems of income and estate taxation.

The study used a large published socioeconomic survey to experiment with a representative sample of the United States to elicit respondents' factual knowledge about tax policy and income or wealth distribution.

The most important aspect of the survey is to study people's understanding of tax policy mechanisms and the reasoning underlying their policy views.

In analyzing policy views, we found that support for income and estate taxes correlated most strongly with social preferences, perceived benefits of redistribution and concerns about inequality and tax fairness, and broader views of government.

Efficiency concerns play a small role in this regard.

These correlation patterns were confirmed by an experimental approach showing an educational video that explains the mechanics and consequences of one of the aspects of tax policy and focuses on the two collectively.

The redistribution and economist treatments significantly increase support for more progressive income and estate taxes, but have no effect in the efficiency treatment.

There is a large partisan gap both in the final policy views and in all stages of reasoning about the underlying mechanisms of taxation.

The disagreement between the Democratic and Republican views of tax policy presented a conclusion that can ultimately be traced to different normative standards and views of government.