Working Paper 2017-10: Raymond Fisman, Keith Gladston, Ilyana Kuziemko, Suresh Naidu
Raymond Fisman, Slater Family Professor in Behavioral Economics, Boston University
Keith Gladstone, Research Assistant, Princeton University
Ilyana Kuziemko, Professor of Economics, Princeton University
Suresh Naidu, Assistant Professor in Economics and International and Public Affairs, Columbia University
A vast theoretical literature in public finance has studied the question of the desirability of capital taxation. Distinct from questions of the optimality of taxing wealth is whether it is politically feasible. We provide, to our knowledge, the first investigation of individuals’ preferences over jointly taxing income and wealth, via a survey on Amazon’s Mechanical Turk. We provide subjects with a set of hypothetical individuals’ incomes and wealth and elicit subjects’ preferred (absolute) tax bill for these individuals. Our method allows us to unobtrusively map both income earned and accumulated wealth into desired tax levels. Our regression results yield roughly linear desired tax rates on income of about 14 percent. Respondents’ suggested tax rates indicate positive desired wealth taxation. When we distinguish between sources of wealth we found that, in line with recent theoretical arguments, subjects’ implied tax rate on wealth is three percent when the source of wealth is inheritance, far higher than the 0.8 percent rate when wealth is from savings. We show these tax rates are consistent with reasonable parameterizations of recent theoretical optimal wealth tax formulae.