Public support for higher taxes on the wealthy: California’s proposition 30

Abstract

It has long been argued that growing inequality would lead to growing demands for redistribution, especially from less affluent individuals who would benefit most from redistribution. Yet, in many countries we have not seen tax increases and even when ballot initiatives allow individuals to directly vote to raise taxes on the wealthy they decline to do so. This raises the question of how economic self-interest shapes voting on tax proposals, and what factors may weaken the links between economic self-interest and tax policy preferences. In the U.S. context partisanship is a factor that has a major influence on attitudes about taxation. To explore how self-interest sometimes overcomes partisanship we take advantage of competing initiatives that were simultaneously on the ballot in California in 2012. California’s Proposition 30, a successful 2012 initiative, significantly increased taxes on the wealthy. By comparing voting on Proposition 30 to voting on Proposition 38, which would have raised taxes on nearly everyone, we observe that when tax hikes are focused only on the wealthy a substantial number of lower income Republicans (i.e., conservatives) defect from their party position opposing taxation. We identify these low-income Republicans as “populists.” Lower income Republicans are also less supportive of income tax increases on the lower and middle classes, and are more sensitive to income tax increases than sales tax increases. We argue that economic self-interest causes heterogeneity within the parties in terms of attitudes toward tax increases.