According to numerous surveys, the large majority of citizens accept the need to pay taxes and approve their existence as an instrument for redistribution and for funding public services. However, we know that the willingness to accept the payment of taxes is not the same among all citizens, nor for all types of tax. A clear example is the different social support for Income Tax (IT) and for Inheritance Tax (IHT): in many countries, the latter faces greater social and political resistance, which has led in recent years to a pronounced reduction in the taxing of inheritances and even the practical disappearance of this tax in some of Spain’s autonomous communities. 

However, numerous experimental studies on distributive justice suggest that we should expect the contrary, since inequality is accepted better when it is perceived as derived from an unequal amount of personal effort, instead of being a consequence of luck or of “windfall” resources such as an inheritance. Why, then, does IHT, which taxes resources not generated by the beneficiary of the inheritance, generate much less support than IT, which fundamentally taxes the work of the taxpayer? 

Various studies have offered explanations for this difference (Gross et al., 2017; Prabhakar, 2009) basing it, for example, on the importance of certain family values as legitimating arguments of the transmission of the inheritance with barely any tax burden, perceptions of the supposed role of said taxes to promote equal opportunities and the reduction of inequality, or the lack of knowledge on how these taxes affect the household based on its situation in the distribution of income and wealth (OECD, 2021). 

To study this question, in March 2020 an online questionnaire was administered to a sample of 1,500 people, representative of the Spanish population. The questionnaire presents the application of two types of taxes, IT and IHT, in different conditions, and tries to determine what factors influence their evaluation. Given that this is a sensitive issue that invites people to conceal their true preferences, the experimental design with random assignation to individuals of different treatments or conditions controlled by the researcher enables, better than other methodologies, the minimisation of biased interpretations and results. 
The survey asks participants to select an effective tax rate (for one of the two types of tax, according to the treatment assigned), and that they do so, randomly, for three different hypothetical income levels (in the case of IT) and three inheritance amounts (in cash) combined with three further possibilities of income of the inheriting party (in the case of IHT); the amounts of income selected are the same for both taxes. The subjects only receive generic information on the minimum and maximum rates applicable today in Spain for both taxes. 

At the same time, two further parameters have been incorporated as experimental treatments. Firstly, half of the participants were asked to choose a value between 0 and 100 to answer the question of what percentage of households they believed were above and below their own in the income distribution in Spain. In this way we know how rich (or poor) the interviewees consider themselves in relation to the rest of the population. Some studies (Fernández-Albertos and Kuo, 2018) have shown that many citizens hold incorrect perceptions on this matter, and that providing them with more precise information with respect to this may increase their support for more progressive tax rates. In our study, they are not presented with the correct information on their location in the real distribution of income; we analyse whether the mere fact of being prompted to reflect on their relative position influences their taxation preferences. 

The second parameter incorporated is the discourse within which the hypothetical situation describing the tax and amounts of income and inheritance is framed. Thus, the subjects read a short phrase that related the tax with (a) equal opportunities, (b) reduction of inequalities, or alternatively (c) it was presented in a neutral fashion. In the two first cases it was expected that a connection would be activated between the tax and the generic principles of distributive justice. Table 1 presents the full set of treatments and hypothetical scenarios of the experiment design.

The questionnaire also enquires on the degree of importance that the subjects confer upon the family (according to a standard scale of familism), their ideology, social trust, preferences for redistribution and other habitual attitudinal and sociodemographic variables, thus attending to virtually all relevant factors for explaining taxation preferences. In turn, the fact that participants choose specific effective rates for specific scenarios enables their relative preferences for both taxes to be compared with regard to fiscal pressure and progressivity. 

The average rates chosen for IT are substantially higher than those preferred for IHT in all the scenarios proposed (figure 1), and they are much more progressive, i.e. the option chosen is to pay more the higher the income. In the case of IHT, this preference for progressivity is clearer when the income of the inheritor is taken into account than when the amount of the inheritance is considered.

It is striking that the average rates chosen for the IHT are appreciably higher than those that really exist in nearly all of Spain’s autonomous communities, especially for lower amounts of inheritance. Something similar occurs with the average rates preferred for IT, above those that exist in the cases of low and medium incomes, but not in the high incomes, in which the average is closer to reality. However, the averages hide a great dispersion of the subjects in the rates chosen under all conditions: it is worth noting that over half of the subjects choose higher rates than those currently predominant in Spain, for IHT and IT alike.

As was expected, pushing subjects to think about their relative situation (without even offering them the correct information on the same) can affect their fiscal preferences. As is observed in figure 2, those who are moved to make this reflection prefer slightly higher rates for both taxes, although the difference is not statistically significant for IHT. Even so, the distance in tax rates chosen for one tax or another is clearly maintained, as well as a notable dispersion in the preferences. 

In contrast, the discourse frameworks that emphasised equal opportunities and the reduction of inequalities do not have a significant impact on the preferred rates for either of the two taxes. Nor do factors such as family-centred values, political ideology, social trust, gender, occupation, educational level, home ownership or having received an inheritance. However, we find an important influence of the subjects’ age (the higher their age, the lower their preferred rates), their income level (only for IHT: the higher their income, the lower their preferred rate) and the willingness to accept risks (when this is greater, higher rates are preferred). 

Given that information is available on the net household income of the subjects (stated upon ending the survey), we can compare the real position of their households in income distribution with their perceived position. In line with previous studies, when they are asked to position themselves in the distribution, the majority tend to concentrate themselves in the middle deciles or positions: the wealthy tend to think that they are substantially less wealthy than they are, and the poor tend to think of themselves as less poor, as shown in figure 3. Nearly 90% of the individuals classify themselves incorrectly; nearly 50% consider themselves poorer than they really are and 40% consider themselves richer than they are in reality. Interestingly, the error is not random: the higher their household income, the more likely individuals will consider themselves poorer than they really are and vice versa.

Figure 4 also shows that the rates chosen for IHT are significantly lower when the subjects believe that they are below their real position in the distribution (this is, when they believe that they are poorer than they really are) than when they believe that they are above it. This suggests that the subjective perception of relative wealth plays a role in the low rates that are preferred for this tax. The fact that this effect is not observed for IT, combined with the evidence that the distribution of real estate wealth is less unequal in Spain than in other countries of the OECD (OECD, 2021), suggests a possible explanation for the lower support for IHT in Spain. 

The experiment reveals that citizens prefer higher and more progressive rates for IT than for IHT, and the majority choose rates higher than the existing ones in both cases. When they are led to reflect on their own position in income distribution, the interviewees tend to prefer slightly higher rates, although again more clearly for IT than for IHT. Neither the discourse frameworks focusing on equal opportunities or redistribution, nor adhesion to family values, nor political ideology or social trust significantly affect their preferences. 

The immense majority locate themselves in higher or lower relative positions in income distribution than those that they really occupy. Self-perception as being poorer than one really is leads to a preference for lower IHT rates.

These results must be taken with caution due to the pronounced dispersion of the preferences, but they suggest that the perceived level of relative income, and not just the real level, may play a role in explaining the differences in social support for certain taxes. One implication of this study is that intensifying the fiscal culture of citizens, as well as their awareness of their position in income distribution, could give rise to a better disposition to pay progressive taxes. 

FERNÁNDEZ-ALBERTOS, J., and KUO, A. (2018). Income Perception, Information, and Progressive Taxation: Evidence from a Survey Experiment. Political Science Research and Methods, 6(1). 

GROSS, C., LOREK, K. and RICHTER, F. (2017). Attitudes towards inheritance taxation – results from a survey experiment. Journal of Economic Inequality, 15.

OCDE (2021). Inheritance Taxation in OECD Countries, OECD Tax Policy Studies, No. 28, OECD Publishing, Paris.

PRABHAKAR R. (2009). Can Public Opposition to Inheritance Tax be Weakened? Public Policy and Administration, 24(3).