Lower Taxes At All Costs? Evidence from a Survey Experiment in Four European Countries

Abstract

It is commonly assumed that voters favor lower taxes, which undermines the ability of governments to raise revenues. How does the demand for lower taxes change when it involves fiscal trade-offs? Who supports tax cuts at all costs? We use a survey experiment conducted in four European countries (Germany, Italy, Spain, and the UK) to answer these questions, studying preferences on income taxes, value added taxes (VAT), and top income taxes. The results show that support for income tax and VAT cuts drops profoundly when it implies lower government spending or higher government debt. Lower top income taxes are always unpopular. Both interest and ideology influence preferences, but for cross-pressured people, ideology dominates: high-income voters that are left-wing oppose tax cuts. The results are important because they suggest that a progressive coalition against lower taxes – including low-income voters and the high-income left – is possible.