TAXING THE 1 PERCENT: PUBLIC OPINION VS. PUBLIC POLICY

Ruben Berge Mathisen, PhD candidate at the Department of Comparative Politics, will be our speaker at the DIGSSCORE seminar today. Ruben will give a 30-minute presentation, followed by 15 minutes of Q&A. The event is in a hybrid format, you are welcome to join us for lunch at the Corner room at DIGSSCORE, Rosenbergsgate 35.

Click here for digital attendance.

Abstract:

A growing body of research suggests that public policy in formal democracies mostly caters to the interests of the rich and ignores the average citizen whenever the two want different things from government. I argue that the modern income tax system has become a clear illustration of this, and I test the proposition on a least likely case: Norway. I asked Norwegians to design their preferred tax structure by setting tax rates for a group of imaginary taxpayers with annual incomes ranging from low to extremely high. Their answers were matched with registry data on what the same kinds of taxpayers actually paid in income tax in 2018. I find that for approximately 99% of the income distribution (the bottom 99%), the current tax system matches closely with public opinion. However, for incomes in the top 1 percent, tax rates are far below (as much as 23 percentage points) from where ordinary citizens, and in fact the modestly affluent, want them to be. I further examine two potential underlying causes of this discrepancy: The gradual reduction of the top marginal income tax rate since the 1960’s, and the preferential taxation of capital incomes, comparing both with public opinion data. My results suggest that even in a fairly egalitarian society like Norway, the rich get away with paying considerably less in tax than what people deem to be fair.