Since taking office, President Biden has been bold on government spending. He introduced a $1.9 trillion stimulus package to tackle the economic fallout from the coronavirus pandemic. His first annual budget proposed spending $6 trillion, including investment in mitigating climate change, upgrading infrastructure, and adding new social programs like free preschool and national paid family leave.
If approved by Congress, this marked expansion of government spending would be financed by increasing taxes on the wealthy and on corporations. Biden’s tax plan includes raising the top individual marginal income tax rate from 37 percent to 39.6 percent, alongside markedly increasing capital gains and domestic corporate tax rates.
While some pundits claim the planned tax hikes are “incredibly popular,” more than a third of Americans do not support these measures — and Republican disapproval is particularly acute. A Morning Consult-Politico poll found that only 32 percent of Republican voters supported infrastructure spending funded by tax hikes on the wealthy and corporations.
Why are so many ordinary Americans opposed to raising taxes on the rich — and what might change their minds? Our research finds that two things make a big difference, especially for Republicans: whether they believe the rich worked for or inherited their income and whether they understand how dramatically tax rates on the top 1 percent have been cut in recent decades.
Democrats do — and Republicans don’t — support higher taxes on the rich
To find out what Americans think about taxing the rich, we fielded a nationally representative online survey, using Prolific Academic. We asked more than 3,000 Americans whether they support increasing the top federal income tax rate. Since this would apply only to individuals with incomes exceeding $523,601, it would almost exclusively affect the richest 1 percent of Americans.
Overall, 61 percent supported that increase — but support varied strongly by partisan affiliation. While 80 percent of Democrats were in favor of raising the top marginal tax rate, only 31 percent of Republicans were. That’s consistent with findings in other U.S. surveys.
Other research suggests that extreme polarization comes in part from different core beliefs. Republicans are more likely than Democrats to believe, for instance, that the rich worked hard for their incomes or that lower taxes help the economy.
To explore that further, we embedded an experiment in our survey. At the beginning of the survey, all survey respondents were randomly divided into five groups. Four groups were asked to read factual information that could pose a shock to their core beliefs. For instance, one group was informed that about 122 American billionaires who inherited their wealth have more money than the bottom 50 percent of the U.S. population. Another group was told that in recent decades, the top marginal tax rate had come down but that economic growth had not increased in any comparable way. The fifth group, which acted as a control group, read a neutral statement about the length of rivers in the United States. We then asked questions about core beliefs and support for tax reforms and compared the answers of each of the first four groups with those of the control group.
Learning the facts changed Republicans’ attitudes about taxing the rich
We found three key things. First, learning what a high proportion of rich Americans inherited their wealth boosted support for raising the top federal income tax rate by six percentage points, compared with those in the control group, who read about rivers. Individuals in this group were also less likely than people in the control group to believe that rich people deserve a lower tax rate or that they worked harder than other Americans. In other words, this information increased support for higher taxes on the rich by fundamentally changing people’s beliefs about whether doing so was fair.
Second, individuals in the group informed that past cuts in the top federal income tax rate did not result in higher economic growth were the most likely to support higher taxes on the rich; this information increased support by more than eight percentage points, compared with the control group. However, when looking at core beliefs, we can see that this cannot be explained by changing beliefs about the economic effects of lower taxes. Instead, the finding is entirely driven by the information that the top federal income tax rate has been cut almost in half since 1979. In other words, once individuals learned how much higher rates had been in the past, they were more willing to raise taxes on the rich today.
Finally, the effects were strongest for Republicans. When Republicans learned that 122 American billionaires who inherited their wealth are wealthier than the bottom 50 percent of the population, their support for raising the top federal income tax rate increased by 13 percentage points. Learning how that the top income tax rate had been cut in half raised support even more dramatically, by about 17 percentage points.
In other words, Republicans’ opposition to tax hikes became much weaker when they learned facts that challenged their beliefs.
The implications for Biden’s tax proposals
No one doubts that the Biden administration will find it challenging to get its ambitious tax proposals through Congress in the face of staunch opposition from businesses and the GOP. Biden and other Democrats have signaled that they’re willing to water down the proposals to gain more Republican support.
But Democrats might also be able to win more Republican lawmakers’ support if rank-and-file GOP voters increase their support for the tax hikes. Our study suggests that the administration might wish to build more bipartisan support by better informing the electorate about who’s rich and how much their taxes have already been cut.
David Hope is an assistant professor of political economy at King’s College London.
Julian Limberg is an assistant professor of public policy at King’s College London.
Nina Weber (@ninasweber) is a doctoral candidate in political economy at King’s College London.