Thread by @rubenbmathisen

Would the rich pay more in tax if public opinion decided?

My new article "Taxing the 1 per cent: Public Opinion vs Public Policy" is now available in FirstView at @BJPolS.

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Here's a thread 🧵 on the main findings https://t.co/gioy4q2CsWcambridge.org/core/journals/…

I explore this question in Norway via 3 studies.

In Study 1, I compare the evolution of the top marginal income tax rate over the past 50 years, with public opinion data.

The comparison shows that the dramatic cuts in the top rate were at odds with what the public wanted.

Much of the time, even at odds with what right-wing voters wanted:

In Study 2, I asked citizens to design their preferred income tax structure, setting rates for the poor all the way up to the super-rich. I then matched their answers with registry data on what people at different incomes actually pay in tax.

Here's what that comparison looks like. For the bottom 99%, it's a pretty good match. However, at the top of the distribution, the discrepancy gets increasingly larger. This is because actual payed tax rates are _regressive_ towards the top (this is the case in many countries).

The divergence between public opinion and actual effective tax rates can be observed across a wide range of subgroups.

Study 3: So why is it like this? A lot has to do with the fact that capital incomes (which the rich rely on) are taxed at flat rates, often lower than labor income.

I did a follow-survey to see if this system aligns with public opinion. It does not. Here are the main result:

Main take-away from the paper: Even in a relatively egalitarian country like Norway, the rich pay considerably less in tax than what they probably would have if public opinion decided.