The Republican tax bill that is about to pass presents a paradox — why would so many democratically elected politicians support a bill that voters hate?
Both conservative- and liberal-leaning economic analysts agree that the bill favors wealthy Americans, and thus is likely to increase the already historic levels of economic inequality in the U.S. It is little wonder then that the bill is unpopular with the American people, a majority of whom oppose the bill.
Indeed, polling data show it is one of the least popular pieces of legislation in polling history, less popular even than some bills that raised taxes. Our research suggests one reason the bill nonetheless got through — higher income people are less likely to be generous when there is an especially large gulf between and the haves and the have-nots.
Ordinary tax payers don’t like the bill, but Republican donors do
Reports suggest the bill is particularly popular among the Republican donor class. This perhaps runs counter to many expectations. One might expect that wealthy people, who have benefited disproportionately from rising inequality, would eventually become satisfied with their increasingly privileged positions. The wealthy might even feel guilty about their gains, supporting redistribution of money to the less well off.
But our research and the research of others suggests that inequality is more likely to have the opposite effect. Higher inequality leads higher income people to feel more entitled and motivates them to protect their resources and privileges.
Inequality erodes the generosity of the better off
To understand the relationship between the generosity of higher income individuals and levels of inequality, we analyzed data from a national survey conducted in 2012. This survey provided a unique opportunity to look at how differences in income and economic inequality might be linked to individuals’ generosity. Participants who completed the survey took part in a giving opportunity in which they were each given 10 tickets to a raffle for a cash prize. Participants could give away any number of the tickets to another participant, who otherwise would have none. The more tickets participants gave away, the more they sacrificed their own chances to win the cash prize, while improving the chances of another participant.
We analyzed how the generosity of participants in this setting was affected by the participant’s income and the level of inequality in their state of residence. Among participants from higher inequality U.S. states, higher income participants gave away fewer tickets than lower income participants. However, among participants from lower inequality states, the relationship was the opposite: Higher income participants gave more than those with lower incomes.
Of course, correlation does not equal causation. There are many other differences between higher and lower inequality states, and these other differences might be the real reasons that higher income residents of higher inequality states gave less.
To further establish that inequality leads higher income people to be less generous, we next conducted an experiment in which we randomly assigned participants to read one of two reports about inequality in their state of residence. One report had a pie chart indicating relatively high levels of inequality, while the other indicated relatively low levels. Participants then took part in the same opportunity to give raffle tickets to another participant as in the prior study.
We found that when participants were shown that they lived in a relatively high inequality state, those with higher incomes donated less to a stranger than those with lower incomes. Donations of higher and lower income individuals were comparable when participants believed their state featured relatively low inequality.
Others researchers find the same pattern
Other researchers report similar findings. In one study, passersby in a wealthy Boston neighborhoods were invited to sign a petition supporting a redistributive policy to increase taxation on incomes over $1 million. The researcher arranged for participants to be petitioned near an actor portraying either an apparently poverty-stricken person, or a business person. People were 4.4 percent less likely to sign the petition supporting the redistributive tax when exposed to the poverty-stricken person nearby.
In another laboratory study, participants played games where they could make more money by hurting the incomes of other players. They were most likely to do this when they started with more money, and where some people started with much more money than others. Notably, it was only when people who started with more money knew that they had an economic advantage that they behaved less generously.
Inequality makes higher income people feel more entitled
All this suggests that high inequality leads people with more resources to avoid doing things that would undermine their advantage. However, they don’t tell us why these people behave in this way. One possible reason is that high inequality might lead these people to feel more entitled to better resources and privileges, because higher inequality makes them feel that they stand out more from the rest of the population. In a survey study, we found evidence supporting this explanation. Higher income residents of highly unequal states reported greater feelings of entitlement to special resources and privileges than lower income residents. By contrast, higher and lower income residents of less unequal states reported about the same levels of entitlement.
This may help explain why Republican donors like the tax bill
These findings suggest one explanation for why increasing inequality fails to satisfy its beneficiaries — inequality leads these people to feel more entitled to superior resources, less inclined to generosity, and less supportive of redistribution. One implication is that inequality is unlikely to be self-correcting and indeed may be self-reinforcing. This points to another possible consequence of the Republican tax bill. By expanding inequality, the legislation may increase the motivation of the political donor class to support future legislation that could expand inequality still further.
Stéphane Côté is a professor of organizational behavior at the Rotman School of Management at the University of Toronto.
Robb Willer is a professor of sociology, psychology, and organizational behavior at Stanford University.