Aligning Taxes and Spending: Theory and Experimental Evidence

34 Pages Posted: 11 Jul 2016 Last revised: 16 Dec 2016

See all articles by Daniel J. Hemel

Daniel J. Hemel

New York University School of Law

Ethan Porter

George Washington University

Date Written: July 12, 2016

Abstract

What accounts for voter attitudes toward taxes and government spending? The tax literature generally assumes that spending is popular and taxes are not. On this view, the widespread practice of earmarking tax revenues for specific expenditures serves a means of overcoming voter opposition to taxes: the earmark makes the benefits of government spending more salient to voters evaluating the tax. This paper posits that the standard model overlooks an important factor affecting voter attitudes toward revenue-raising measures: the fit between the tax and the expenditure. Drawing from the consumer psychology literature, we hypothesize that voters prefer their taxes to achieve "source-use alignability," wherein the source of the tax aligns with the use of the resulting revenues. Evidence in support of this perspective comes from three studies. Studies 1 and 2 consist of survey experiments administered on Internet-based samples, in which subjects were randomly shown various hypothetical earmarked taxes. Across multiple types of earmarked taxes, we observe a strong preference for source-use alignability. Study 3, an examination of recent state ballot initiatives on taxing and spending, provides external validity to our lab-based findings. Our results help to explain which earmarked taxes are likely to be popular among voters -- and which are not.

Keywords: taxes, survey experiment

Suggested Citation

Hemel, Daniel J. and Porter, Ethan, Aligning Taxes and Spending: Theory and Experimental Evidence (July 12, 2016). Available at SSRN: https://ssrn.com/abstract=2807969 or http://dx.doi.org/10.2139/ssrn.2807969

Daniel J. Hemel

New York University School of Law ( email )

Ethan Porter (Contact Author)

George Washington University ( email )

2121 I Street NW
Washington, DC 20052
United States

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