Preferences under pressure: financial strain and support for progressive taxation
2025-10-06
Americans have not responded to rising income inequality by demanding higher taxes on top incomes. Does this mean that ideological beliefs trump material conditions for explaining voters’ views on taxing the rich? We argue that it does not. Though Americans may be insensitive to rising inequality as long as their own finances are stable, we propose that the experience of financial strain changes individuals’ views about inequality and makes them more supportive of progressive tax hikes. Using panel survey evidence, we show that financial strain in the form of income loss leads to greater support for raising taxes on high incomes. This is true among both Republicans and Democrats. Financial strain appears to shift respondents’ tax preferences by inducing discontent and anger about economic inequality. This suggests that voters’ beliefs about the fairness of market outcomes are endogenous to changes in their material circumstances.