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[1/20]”Understanding Tax Policy: How do people reason?” New working paper on how people understand, reason & learn about taxes. What are the mental models that people use to think about taxes? I want to uncover not just factual knowledge but also reasoning https://scholar.harvard.edu/files/stantcheva/files/w27699_1.pdf
[2/20] What ultimately drives our views on taxes? Do we perceive different economic costs & distortions from taxes? Do we disagree on how they impact the lives of different people?
[3/20] Do we trust the government to the same extent? Do we have different views on how revenues are currently spent? Does what we KNOW about taxes differ, or do we have different notions of FAIRNESS?
[4/20] To disentangle these effects, I run large-scale online Social Economics Surveys & Experiments in the U.S. with detailed questions on people’s mental models when thinking about taxes. I then examine which components of these mental models drive policy views the most.
[5/20] Support for tax policy most strongly correlates with views on fairness & the benefits of redistribution, followed by views on government. Efficiency concerns play a more minor role in people’s minds. It's thus crucial to study what is considered “fair” by different people
[6/20] Because “Fairness” concerns seem to be the main drivers of support for taxes or lack thereof... and yet fairness is in the eye of the beholder!
[7/20] Experimental results confirm this link from perceived mechanisms to policy views. I show people three pedagogical videos, like mini econ-101 courses, that explain the different mechanisms of taxes: ...
[8/20] .. namely, their redistribution impacts, efficiency effects & the trade-off between these two (the "Economist" video). Focusing on redistribution effects or even the trade-off between redistribution & efficiency increases support for progressive taxation.
![[8/20] .. namely, their redistribution impacts, efficiency effects & the trade-off between these two (the "Economist" video). Focusing on redistribution effects or even the trade-off between redistribution & efficiency increases support for progressive taxation.](https://pbs.twimg.com/media/EftFPB7XYAUtxaN.jpg "[8/20] .. namely, their redistribution impacts, efficiency effects & the trade-off between these two (the \"Economist\" video). Focusing on redistribution effects or even the trade-off between redistribution & efficiency increases support for progressive taxation.")
[9/20] The possibility to influence the perceived mechanisms & views on tax policy suggests that explanations (rather than just provision of simple facts) can be useful at least as a 1st step in elevating the policy debate. The goal: help understand, not push in a given direction
[10/20] What about partisan divergences? They are large. Not just in final policy views, but also in how people reason about the underlying mechanisms.
[11/20] Relative to Republicans, Democrats are more likely to believe that taxes have less economic costs, that tax cuts almost never "pay for themselves" and that people will not starkly change behaviors in response to tax increases.
[12/20] Democrats believe less in "trickle-down," whereby tax cuts on high incomes would benefit everyone. They are also much more likely than Republicans to think that the distributions of income, wealth & inheritances are unfair & that taxing away parts of them is fair.
[13/20] There is even a “Polarization of Reality” on taxes too, i.e. a disagreement about basic facts that can be easily checked (we have documented this for other issues too). People on the right perceive current taxes as higher & more progressive than people on the left.
[14/20] This is part of a bigger agenda on “Understanding Economics” to study how people reason about major policies: taxes, health insurance, trade, macro policies. Website where you can visually explore the responses of people on all these policy issues: https://understandingeconomics.org/#/
[15/20] Part of broader project of "Social Economics" that uses surveys & experiments to "get into people’s minds" & understand how we think about & experience our economic circumstances, others, the economy & policies. Website with more projects here: http://socialeconomicslab.org/
[16/20] Some select figures for those interested: I use open-ended questions to “let people talk” about their first-order concerns & use text analysis methods, e.g.: what are the main shortcomings of the estate tax in people’s minds: Double taxation!
![[16/20] Some select figures for those interested: I use open-ended questions to “let people talk” about their first-order concerns & use text analysis methods, e.g.: what are the main shortcomings of the estate tax in people’s minds: Double taxation!](https://pbs.twimg.com/media/EftF9u_X0AErHeK.jpg "[16/20] Some select figures for those interested: I use open-ended questions to “let people talk” about their first-order concerns & use text analysis methods, e.g.: what are the main shortcomings of the estate tax in people’s minds: Double taxation!")
[17/20] What are key topics people mention when asked about their main considerations on income taxes? Distribution on the left; government spending on the right, and “fairness” across the spectrum (recall: fairness is in the eye of the beholder!)
![[17/20] What are key topics people mention when asked about their main considerations on income taxes? Distribution on the left; government spending on the right, and “fairness” across the spectrum (recall: fairness is in the eye of the beholder!)](https://pbs.twimg.com/media/EftGFdIXsAAhIcB.jpg "[17/20] What are key topics people mention when asked about their main considerations on income taxes? Distribution on the left; government spending on the right, and “fairness” across the spectrum (recall: fairness is in the eye of the beholder!)")
[18/20] Share of respondents who believe high earners or the middle class will engage in the following behaviors if their taxes were to increase (x axis: Share of Democrats, y-axis: additional share of Republicans).
![[18/20] Share of respondents who believe high earners or the middle class will engage in the following behaviors if their taxes were to increase (x axis: Share of Democrats, y-axis: additional share of Republicans).](https://pbs.twimg.com/media/EftGL2GXoAEJPpK.jpg "[18/20] Share of respondents who believe high earners or the middle class will engage in the following behaviors if their taxes were to increase (x axis: Share of Democrats, y-axis: additional share of Republicans).")
[19/20] Share of Republicans and Democrats who agree that tax cuts will pay for themselves ("Laffer effects"), have economic costs, or that tax cuts on high-incomes will benefit everyone (“trickle-down”).
![[19/20] Share of Republicans and Democrats who agree that tax cuts will pay for themselves ("Laffer effects"), have economic costs, or that tax cuts on high-incomes will benefit everyone (“trickle-down”).](https://pbs.twimg.com/media/EftGQ9qXsAA8W3M.jpg "[19/20] Share of Republicans and Democrats who agree that tax cuts will pay for themselves (\"Laffer effects\"), have economic costs, or that tax cuts on high-incomes will benefit everyone (“trickle-down”).")
[20/20] Share of Republicans and Democrats who agree with fairness statements on the left.
![[20/20] Share of Republicans and Democrats who agree with fairness statements on the left.](https://pbs.twimg.com/media/EftGWFEX0AAKgU1.jpg "[20/20] Share of Republicans and Democrats who agree with fairness statements on the left.")
