Saturday, October 01, 2011

Fear of falling

"Why Middle-Class People Fear Tax Increases on the Rich":
"It’s usually assumed that the reason Americans specifically don’t want to see taxes raised on the rich is because, in spite of driving a defunct GM brand four-door, they think of themselves as the “soon-to-be rich.” But a paper published in the National Journal of Economic Research in July suggests otherwise. They offer that it’s not hoping to be on top that makes us not want the wealthier to be taxed more – it’s the fear of being at the bottom. It’s referred to as “last-place aversion.”

The Economist wrote, “In keeping with the notion of ‘last-place aversion,’ the people who were a spot away from the bottom were the most likely to give the money to the person above them: rewarding the ‘rich’ but ensuring that someone remained poorer than themselves.”
So taxing the rich isn’t about the fantasy that we’re going to someday be rich – it’s about the very real visceral fear of being, well, the poorest. If the government helps those below you, then they’ll be at your level – that’s the unfairness they’re afraid of."
More food for thought from that Economist article:
"The differences in attitude towards redistributive taxes are not just between countries but also within them, and economists have several explanations as to why. When it comes to differences between countries, social cohesion plays a major role. Broadly speaking, countries that are more ethnically or racially homogeneous are more comfortable with the state seeking to mitigate inequality by transferring some resources from richer to poorer people through the fiscal system. This may explain why Swedes complain less about high taxes than the inhabitants of a country of immigrants such as America. But it also suggests that even societies with a tradition of high taxes (such as those in Scandinavia) might find that their citizens would become less willing to finance generous welfare programmes were immigrants to make up a greater share of their populations."
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