Inequality Federalism and Economic Self-Interest in Subnational Progressive Tax Politics

Abstract

In a national context of unabated inequality growth and recurrent tax cuts benefiting the wealthy, we have witnessed a notable rise in “inequality federalism,” characterized by subnational initiatives to redress economic inequality through progressive taxation and social spending. While leading research documents the tendency for Americans to fall prey to “unenlightened self-interest” when evaluating complex national tax policy, recent research suggests that the simplicity and clarity of emerging subnational redistributive initiatives facilitates the enactment of economic self-interest, particularly among lower income citizens. This short article builds on prior work by offering the most extensive analysis to date of the role of economic self-interest in public support for subnational progressive tax policies. Drawing upon opinion polls covering eight separate state ballot measures or legislative enactments, we find that in each instance the greatest level of support for the respective progressive tax policy is observed among lower income citizens.

Are Tax Cuts Supporters Self-Interested and/or Partisan? The Case of the Tax Cuts and Jobs Act

“…The interaction coefficient is positive: as party identification increases from strong Democrat to strong Republican (horizontal axis), the marginal effect of income becomes larger and shifts from negative to positive (vertical axis). It appears that the difference in opinion between low- and high-income respondents is only consistent among Republicans (a similar dynamic between income and party identification is observed by Newman & Teten, 2021). The average predicted probability of supporting the tax cuts is 100% when income is set at its highest value, and 79% when it is set at its lowest value.…”

“…Meltzer and Richard’s (1981) rational theory of the size of government predicts that, as income inequality rises, the median voter will come to support higher levels of taxation in order to increase revenue transfers from the top to the bottom half of the income distribution. Indeed, lower-income Americans sometimes enact their self-interest by supporting redistributive proposals (Newman & Teten, 2021). As to wealthy Americans, they often hold views on the economy, regulations, taxes, inequality, and public spending that are more conservative than those of the general electorate (Cohn et al, 2019; Page et al, 2013).…”

“…Three complementary mechanisms should lead to this heterogeneous relationship. First, class cleavages inside the Republican Party—but not the Democratic Party—result in intra-partisan differences in policy preferences that can be explained by income (Newman & Teten, 2021, p. 248). Rich Republicans are more likely than their poorer co-partisans to have regressive views on taxation; mainly, they disproportionately favor cutting taxes on the wealthy and corporations (Fingerhut, 2017).…”

The Effects of Solidarity, Income, and Reliance on the State on Personal Income Tax Preferences. The Case of the Czech Republic

“…In most cases, the higher the income, the lower the preferences for tax progressivity [50][51][52][53][54]. The decision is rational, as people usually do not like to be taxed.…”

Immigration Attitudes and White Americans’ Responsiveness to Rising Income Inequality

“…Research in this vein also demonstrates a relationship between local income inequality and support for government spending (Johnston & Newman, 2016; Newman, 2019). Additional observational work finds a relatively strong relationship between individuals’ attitudes toward inequality and their economic self-interest with their support for progressive taxation (Franko et al, 2013; Newman & Teten, 2020). However, others find that many Americans do not strongly connect their opposition to inequality with support for policies meant to reduce income disparities (Hayes, 2014; Macdonald, 2020).…”