Do Voters Understand the Benefits of Taxes?

We use economic experiments to study a fundamental question in political economy: Do voters understand the benefits of taxes? Participants play an economic game as members of a virtual society composed of computer players. In each round, the players earn low or high income, see the distribution of income, and then vote for low or high taxes. We test whether participants vote rationally for high taxes when poor and low taxes when rich, following a classic model in political economy, or whether they focus on the burden of taxes more than the benefits. Across three experiments, poor players voted against high taxes 30% to 50% of the time, and they were more opposed when the same policy was labeled “taxes” than when it was labeled “sharing.” In Experiment 2, Singaporean participants opposed taxes at about the same rate as those of Americans in Experiment 1. In Experiment 3, participants’ opposition to taxes persisted when they received low income every round. These results support the burden hypothesis: voters focus more on the burden of paying taxes than on the benefits they provide. We reflect on what the results imply for the politics of taxes.