Preferences for income redistribution: a new survey instrument and experimental evidence

Jochem De Bresser

Abstract:

This paper proposes a new survey instrument to measure preferences for income redistribution. Starting from the status quo, respondents construct their preferred distribution of after-tax income by changing the tax rates of the bottom four income quintiles. Taxes for the top quintile update automatically to keep the size of the govern-ment budget fixed and incorporate realistic adjustment of taxable income (e.g. changes in labor supply or tax evasion). The new measure is quantitative, comparable across individuals and focuses on redistribution without simultaneous changes in social insur-ance or the size of the government. Moreover, it connects outcomes with the policy tools available to affect them and engages respondents by dynamically updating the income distribution both graphically and numerically. Data are collected in the LISS panel, a large scientific panel that is representative for the Dutch population. The results indicate that the status quo is optimal for about half of the sample and that the other half would prefer a more equal distribution. Only 5% opt for more inequality, but not beyond a flat-tax. Two information treatments inform respondents about the efficiency costs of redistribution, updated dynamically, and the most important income sources across income groups. The latter prompts respondents to stick to the status quo rather than increase equality, while efficiency costs lead to smaller deviations without changing their incidence.