Hostname: page-component-f554764f5-44mx8 Total loading time: 0 Render date: 2025-04-22T05:48:05.743Z Has data issue: false hasContentIssue false
  • English
  • Français

What’s fair? Preferences for tax progressivity in the wake of the financial crisis

Published online by Cambridge University Press:  31 January 2019

Julian Limberg Open the ORCID record for Julian Limberg [Opens in a new window]
Julian Limberg*
Affiliation:
Department of Political and Social Sciences, European University Institute, Italy
*
*Corresponding author. Email: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

Progressive taxation is an effective redistributive tool in times of growing inequality. However, like all public policies, an increase in tax progressivity is unlikely if it lacks popular demand. Has the financial crisis affected the demand for progressive taxation? Building on research that has identified fairness beliefs as the main factor pushing for taxes on the rich, I argue that the Great Recession and states’ reactions to it have caused a general shift in tax policy preferences. As a consequence, demand for tax progressivity is higher in crisis countries. Multilevel analyses using survey data for 32 countries show support for my argument. These findings have important implications for our understanding of the politics of redistribution in the 21st century.

Keywords

fairnessinequalitypreferencesredistributiontaxation
Type
Research Article
Information
Journal of Public Policy , Volume 40 , Issue 2 , June 2020 , pp. 171 - 193
Copyright
© Cambridge University Press 2019

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

References

Ackert, LF, Martinez-Vazquez, J and Rider, M (2007) Social Preferences and Tax Policy Design: Some Experimental Evidence. Economic Inquiry 45(3): 487–501.CrossRefGoogle Scholar
Alesina, A and Angeletos, G-M (2005) Fairness and Redistribution. The American Economic Review 95(4): 960–980.CrossRefGoogle Scholar
Alesina, A, Stantcheva, S and Teso, E (2018) Intergenerational Mobility and Preferences for Redistribution. American Economic Review 108(2): 521–554.CrossRefGoogle Scholar
Allison, PD (2009) Fixed Effects Regression Models. Thousand Oaks, CA: Sage.Google Scholar
Alt, J and Iversen, T (2017) Inequality, Labor Market Segmentation, and Preferences for Redistribution. American Journal of Political Science 61(1): 21–36.Google Scholar
Atkinson, AB (2015) Inequality. Cambridge: Harvard University Press.CrossRefGoogle Scholar
Atkinson, AB and Piketty, T (2010) Top Incomes: A Global Perspective. Oxford: Oxford University Press.Google Scholar
Ballard-Rosa, C, Martin, L and Scheve, K (2017) The Structure of American Income Tax Policy Preferences. The Journal of Politics 79(1): 1–16.Google Scholar
Barnes, L (2015) The Size and Shape of Government: Preferences Over Redistributive Tax Policy. Socio-Economic Review 13(1): 55–78.CrossRefGoogle Scholar
Bartels, LM (2005) Homer Gets a Tax Cut: Inequality and Public Policy in the American Mind. Perspectives on Politics 3(1): 15–31.Google Scholar
Bartels, LM (2007) Homer Gets a Warm Hug: A Note on Ignorance and Extenuation. Perspectives on Politics 5(4): 785–790.CrossRefGoogle Scholar
Bartels, LM (2013) Political Effects of the Great Recession. The Annals of the American Academy of Political and Social Science 650(1): 47–76.CrossRefGoogle Scholar
Bartels, LM and Bermeo, N (eds.) (2014) Mass Politics in Tough Times: Opinions, Votes and Protest in the Great Recession. Oxford: Oxford University Press.Google Scholar
Beckert, J (2008) Inherited Wealth. Princeton, NJ: Princeton University Press.Google Scholar
Beramendi, P and Rehm, P (2016) ). Who Gives, Who Gains? Progressivity and Preferences. Comparative Political Studies 49(4): 529–563.Google Scholar
Berens, S and Gelepithis, M (2018) Welfare State Structure, Inequality, and Public Attitudes Towards Progressive Taxation. Socio-Economic Review, 1–28, First View.CrossRefGoogle Scholar
Brambor, T, Clark, WR and Golder, M (2006) Understanding Interaction Models: Improving Empirical Analyses. Political Analysis 14(1): 63–82.CrossRefGoogle Scholar
Carnes, M and Mares, I (2015) Explaining the “Return of the State” in Middle-Income Countries: Employment Vulnerability, Income, and Preferences for Social Protection in Latin America. Politics & Society 43(4): 525–550.CrossRefGoogle Scholar
Cihak, M, Demirguc-Kunt, A, Feyen, E and Levine, R (2012) Benchmarking Financial Systems Around the World. Policy Research Working Paper Series No. 6175. The World Bank, Washington, DC.CrossRefGoogle Scholar
Comiskey, M and Madhogarhia, P (2009) Unraveling the Financial Crisis of 2008. PS: Political Science & Politics 42(2): 271–275.Google Scholar
Dion, ML and Birchfield, V (2010) Economic Development, Income Inequality, and Preferences for Redistribution. International Studies Quarterly 54(2): 315–334.CrossRefGoogle Scholar
Durante, R, Putterman, L and van der Weele, J (2014) Preferences for Redistribution and Perception of Fairness: An Experimental Study. Journal of the European Economic Association 12(4): 1059–1086.CrossRefGoogle Scholar
The Economist (2018) Stuck in the Past - Overhaul Tax for the 21st Century, https://www.economist.com/leaders/2018/08/09/overhaul-tax-for-the-21st-century (accessed 1 September 2018).Google Scholar
Fong, C (2001) Social Preferences, Self-Interest, and the Demand for Redistribution. Journal of Public Economics 82(2): 225–246.CrossRefGoogle Scholar
Foster, JB and Magdoff, F (2009) The Great Financial Crisis: Causes and Consequences. New York: Monthly Review Press.Google Scholar
Fourcade, M, Steiner, P, Streeck, W and Woll, C (2013) Moral Categories in the Financial Crisis. Socio-Economic Review 11(3): 601–627.CrossRefGoogle Scholar
Ganghof, S (2006) The Politics ofIncome Taxation: A Comparative Analysis. Colchester: ECPR Press.Google Scholar
Genschel, P, Kemmerling, A and Seils, E (2011) Accelerating Downhill: How the EU Shapes Corporate Tax Competition in the Single Market. JCMS: Journal of Common Market Studies 49(3): 585–606.Google Scholar
Genschel, P and Schwarz, P (2011) Tax Competition: A Literature Review. Socio-Economic Review 9(2): 339–370.CrossRefGoogle Scholar
Gingrich, J and Ansell, B (2012) Preferences in Context Micro Preferences, Macro Contexts, and the Demand for Social Policy. Comparative Political Studies 45(12): 1624–1654.CrossRefGoogle Scholar
Hacker, JS and Pierson, P (2005) Abandoning the Middle: The Bush Tax Cuts and the Limits of Democratic Control. Perspectives on Politics 3(1): 33–53.Google Scholar
Hacker, JS and Pierson, P (2010) Winner-Take-All Politics: Public Policy, Political Organization, and the Precipitous Rise of Top Incomes in the United States. Politics & Society 38(2): 152–204.CrossRefGoogle Scholar
Hainmueller, J, Mummolo, J and Xu, Y (2017) How Much Should we Trust Estimates from Multiplicative Interaction Models? Simple Tools to Improve Empirical Practice. SSRN Scholarly Paper No. ID 2739221, Social Science Research Network, Rochester, NY.Google Scholar
Hakelberg, L (2016) Coercion in International Tax Cooperation: Identifying the Prerequisites for Sanction Threats by a Great Power. Review of International Political Economy 23(3): 511–541.CrossRefGoogle Scholar
Häusermann, S, Kurer, T and Schwander, H (2016) Sharing the Risk? Households, Labor Market Vulnerability, and Social Policy Preferences in Western Europe. The Journal of Politics 78(4): 1045–1060.CrossRefGoogle Scholar
Hellwig, T and Coffey, E (2011) Public Opinion, Party Messages, and Responsibility for the Financial Crisis in Britain. Electoral Studies 30(3): 417–426.CrossRefGoogle Scholar
Hennighausen, T and Heinemann, F (2015) Don’t Tax Me? Determinants of Individual Attitudes Toward Progressive Taxation. German Economic Review 16(3): 255–289.Google Scholar
Hox, J (2010) Multilevel Analysis: Techniques and Application. New York: Routledge.CrossRefGoogle Scholar
IMF (2017) Government Finance Statistics. Washington, DC: IMF.Google Scholar
Kenworthy, L and Pontusson, J (2005) Rising Inequality and the Politics of Redistribution in Affluent Countries. Perspectives on Politics 3(3): 449–471.Google Scholar
Kiser, E and Karceski, SM (2017) Political Economy of Taxation. Annual Review of Political Science 20(1): 75–92.CrossRefGoogle Scholar
Krugman, P (2011) We are the 99.9%. The New York Times, http://www.nytimes.com/2011/11/25/opinion/we-are-the-99-9.html (accessed 28 March 2017).Google Scholar
Laeven, L and Valencia, F (2012) Systemic Banking Crises Database: An Update. IMF Working Paper No. WP/12/163. International Monetary Fund, Washington, DC.CrossRefGoogle Scholar
Leifield, P (2013) texreg: Conversion of Statistical Model Output in R to LaTeX and HTML Tables. Journal of Statistical Software 55(8): 1–24.Google Scholar
Lenz, G and Sahn, A (2017) Achieving Statistical Significance with Covariates and without Transparency. doi:10.31222/osf.io/s42ba.CrossRefGoogle Scholar
Lierse, H and Seelkopf, L (2016) Capital Markets and Tax Policy Making: A Comparative Analysis of European Tax Reforms Since the Crisis. Comparative European Politics 14(5): 686–716.CrossRefGoogle Scholar
Lü, X and Scheve, K (2016) Self-Centered Inequity Aversion and the Mass Politics of Taxation. Comparative Political Studies 49(14): 1965–1997.CrossRefGoogle Scholar
Lupia, A, Levine, AS, Menning, JO and Sin, G (2007) Were Bush Tax Cut Supporters “Simply Ignorant?” A Second Look at Conservatives and Liberals in “Homer Gets a Tax Cut”. Perspectives on Politics 5(4): 773–784.Google Scholar
Margalit, Y (2013) Explaining Social Policy Preferences: Evidence from the Great Recession. American Political Science Review 107(1): 80–103.CrossRefGoogle Scholar
Meltzer, AH and Richard, SF (1981) A Rational Theory of the Size of Government. Journal of Political Economy 89(5): 914–927.CrossRefGoogle Scholar
Moene, KO and Wallerstein, M (2001) Inequality, Social Insurance, and Redistribution. American Political Science Review 95(4): 859–874.Google Scholar
Moene, KO and Wallerstein, M (2003) Earnings Inequality and Welfare Spending: A Disaggregated Analysis. World Politics 55(4): 485–516.Google Scholar
Möhring, K (2012) The Fixed Effects Approach as Alternative to Multilevel Models for Cross-National Analyses. GK SOCLIFE Working Paper Series, Cologne, 16/2012.Google Scholar
Morgenson, G and Rosner, J (2011) Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon. New York: Times Books.Google Scholar
Münnich, S (2016) Readjusting Imagined Markets: Morality and Institutional Resilience in the German and British Bank Bailout of 2008. Socio-Economic Review 14(2): 283–307.Google Scholar
Obinger, H (2012) Generationen und Politikwandel: Die demografische Ausdunnung der Kriegskohorten und die Transformation des Interventionsstaates. der moderne staat - Zeitschrift fur Public Policy, Recht und Management 5(1): 169–192.Google Scholar
OECD (2017) OECD Taxing Wages. Paris: OECD.Google Scholar
Onorato, MG, Scheve, K and Stasavage, D (2014) Technology and the Era of the Mass Army. The Journal of Economic History 74(2): 449–481.CrossRefGoogle Scholar
Pfeffer, FT, Danziger, S and Schoeni, RF (2013) Wealth Disparities Before and After the Great Recession. The Annals of the American Academy of Political and Social Science 650(1): 98–123.CrossRefGoogle ScholarPubMed
Piketty, T (2014) Capital in the Twenty First Century. Cambridge: Harvard University Press.CrossRefGoogle ScholarPubMed
Prasad, M and Deng, Y (2009) Taxation and the Worlds of Welfare. Socio-Economic Review 7(3): 431–457.Google Scholar
Prichard, W (2016) Reassessing Tax and Development Research: A New Dataset, New Findings, and Lessons for Research. World Development 80, 48–60.CrossRefGoogle Scholar
Rehm, P (2009) Risks and Redistribution An Individual-Level Analysis. Comparative Political Studies 42(7): 855–881.Google Scholar
Rehm, P (2011) Social Policy by Popular Demand. World Politics 63(2): 271–299.CrossRefGoogle Scholar
Rehm, P, Hacker, JS and Schlesinger, M (2012) Insecure Alliances: Risk, Inequality, and Support for the Welfare State. American Political Science Review 106(2): 386–406.CrossRefGoogle Scholar
Reinhart, CM and Rogoff, KS (2013) Banking Crises: An Equal Opportunity Menace. Journal of Banking & Finance 37(11): 4557–4573.CrossRefGoogle Scholar
Rowlingson, K and Connor, S (2011) The “Deserving” Rich? Inequality, Morality and Social Policy. Journal of Social Policy 40(3): 437–452.Google Scholar
Rueda, D (2005) Insider-Outsider Politics in Industrialized Democracies: The Challenge to Social Democratic Parties. American Political Science Review 99(1): 61–74.CrossRefGoogle Scholar
Sarkees, MR and Wayman, FW (2010) Resort to War: 1816-2007. Washington, DC: CQ Press.Google Scholar
Scheve, K and Stasavage, D (2006) Religion and Preferences for Social Insurance. Quarterly Journal of Political Science 1(3): 255–286.CrossRefGoogle Scholar
Scheve, K and Stasavage, D (2010) The Conscription of Wealth: Mass Warfare and the Demand for Progressive Taxation. International Organization 64(4): 529–561.CrossRefGoogle Scholar
Scheve, K and Stasavage, D (2012) Democracy, War, and Wealth: Lessons from Two Centuries of Inheritance Taxation. American Political Science Review 106(1): 81–102.CrossRefGoogle Scholar
Scheve, K and Stasavage, D (2016) Taxing the Rich: A History of Fiscal Fairness in the United States and Europe. Princeton, NJ: Princeton University Press.Google Scholar
Schmidt-Catran, AW (2016) Economic Inequality and Public Demand for Redistribution: Combining Cross-Sectional and Longitudinal Evidence. Socio-Economic Review 14(1): 119–140.CrossRefGoogle Scholar
Seelkopf, L and Genschel, P (2018) Tax Introduction Database (TID). Florence: European University Institute.Google Scholar
Sinn, H-W (2010) Casino Capitalism: How the Financial Crisis Came About and What Needs to be Done Now. Oxford: Oxford University Press.Google Scholar
Solt, F (2016) The Standardized World Income Inequality Database. Social Science Quarterly 97(5): 1267–1281.CrossRefGoogle Scholar
Solt, F and Hu, Y (2015) Interplot: Plot the Effects of Variables in Interaction Terms. Available at The Comprehensive R Archive Network (CRAN). http://CRAN.R-project.org/package=interplotGoogle Scholar
Stegmueller, D (2013) How Many Countries for Multilevel Modeling? A Comparison of Frequentist and Bayesian Approaches. American Journal of Political Science 57(3): 748–761.CrossRefGoogle Scholar
Stegmueller, D, Scheepers, P, Roβteutscher, S and de Jong, E (2012) Support for Redistribution in Western Europe: Assessing the Role of Religion. European Sociological Review 28(4): 482–497.CrossRefGoogle Scholar
Swank, D (2006) Tax Policy in an Era of Internationalization: Explaining the Spread of Neoliberalism. International Organization 60(4): 847–882.Google Scholar
Swank, D (2016a) Taxing Choices: International Competition, Domestic Institutions and the Transformation of Corporate Tax Policy. Journal of European Public Policy 23(4): 571–603.CrossRefGoogle Scholar
Swank, D (2016b) The New Political Economy of Taxation in the Developing World. Review of International Political Economy 23(2): 185–207.CrossRefGoogle Scholar
Tyran, J-R and Sausgruber, R (2006) A Little Fairness May Induce a Lot of Redistribution in Democracy. European Economic Review 50(2): 469–485.CrossRefGoogle Scholar
Varian, HR (1980) Redistributive Taxation as Social Insurance. Journal of Public Economics 14(1): 49–68.CrossRefGoogle Scholar
Volscho, TW and Kelly, NJ (2012) The Rise of the Super-Rich Power Resources, Taxes, Financial Markets, and the Dynamics of the Top 1 Percent, 1949 to 2008. American Sociological Review 77(5): 679–699.CrossRefGoogle Scholar
Widmaier, WW, Blyth, M and Seabrooke, L (2007) Exogenous Shocks or Endogenous Constructions? The Meanings of Wars and Crises. International Studies Quarterly 51(4): 747–759.CrossRefGoogle Scholar
World Bank (2017) World Bank National Accounts Data. Washington, DC: The World Bank.Google Scholar
Supplementary material: PDF

Limberg supplementary material

Limberg supplementary material 1
Download Limberg supplementary material(PDF)
PDF 223.2 KB
Supplementary material: PDF

Limberg supplementary material

Limberg supplementary material 2
Download Limberg supplementary material(PDF)
PDF 8.7 KB
Supplementary material: PDF

Limberg supplementary material

Limberg supplementary material 3
Download Limberg supplementary material(PDF)
PDF 8.4 KB
Supplementary material: Link

Limberg Dataset

Dataset

https://doi.org/10.7910/DVN/WKCZ9Z
Link