Merit, Luck, and Taxes: Societal Reward Rules, Self-Interest, and Ideology in a Real-Effort Voting Experiment

Abstract

When are high earnings considered a legitimate target for redistribution, and when not? We design a real-effort laboratory experiment in which we manipulate the assignment of payrates (societal “reward rules”) that translate performance on a real-effort counting task into pre-tax earnings. We then ask subjects to vote on a flat tax rate in groups of three. We distinguish three treatment conditions: the same payrate for all group members (“equal” reward rule), differential (low, medium, and high) but random payrates (“luck” rule), and differential payrates based on subjects’ performance on a quiz with voluntary preparation opportunity (“merit” rule). Self-interest is the dominant tax voting motivation. Tax levels are lower under “merit” rule than under “luck” rule, and merit reasoning overrides political ideology. But information is needed to activate merit reasoning. Both these latter effects are present only when voters have “full merit knowledge” that signals precisely how others obtained their incomes.

People's Preferences for Inequality Respond Instantly to Changes in Status: A Simulated Society Experiment of Conflict Between the Rich and the Poor

“…Some have suggested that the route to decreasing the role of self‐interest is to emphasize the randomness of outcomes (e.g., Gee, Migueis, & Parsa, 2017; Tepe, Vanhuysse, & Lutz, 2020). Agent‐based modeling suggests that distributions of income like the ones in the United States arise from chance factors more than individuals’ abilities or skills (Pluchino, Emanuele Biondo, & Rapisarda, 2018).…”