Briefing paper
A Pay Check Half Full or Half Empty?
With just weeks until the government’s new 50% tax rate comes into force, one controversial topic in public policy
is whether increasing tax for the rich is thought of as fair. It should be an easily-answered question: Just go out
and ask a few hundred members of the public what they think. But new research from ELSE fellow Stian Reimers
suggests that people can have more than one sense of what constitutes a fair split of the tax burden between rich
and poor. In short, people’s views
about tax depend on how you
ask the question.
In an experiment,
Reimers asked 400
online respondents to
move a slider to show
how they would split a
fixed tax burden
between two people:
Higher earning Andy,
who makes £50k a year,
and lower-earning Bob, who
makes £20k. For half the
participants the task was framed in
terms of how much Andy and Bob paid in tax, and for the other half it
was how much Andy and Bob had left after tax. Participants favoured
progressiveness – taxing the rich more – more strongly when
considering post-tax money retained rather than tax paid.
One possible explanation is that different ’framing conditions’ activate different notions of fairness. Reimers notes
“Two important goals of income tax are to raise money to pay for public services, and to redistribute money
across rich and poor. It’s possible to have completely different views about what’s fair in these two areas.”
“Take the extreme example of a banker earning £200,000 a year. He’ll pay around £75,000 in tax. Someone on
the UK average wage of £25,500 would pay around £6,000. People generally think that the banker is making a
fair contribution to society. But flip it around and point out that he’s left with £125,000 a year after tax, whereas
the average person is left with £19,500, and people generally think it’s unfair to have that disparity, so push for
taxing the banker more and the average Joe less.”
Reimers’ research highlights important issues around mea