Tag Archives: tax the wealthy

People are People

Never, ever underestimate the effect of basic human emotions. Want to understand why people continually make decisions that, if looked at objectively, are pretty stupid?  Simply remember that people are always capable of doing things that are illogical because they are possessed of emotions and those emotions are far more powerful than any logic.

Keep that in mind as you read this piece in the Economist that explores why poor people are less likely than you'd expect to be in favor of increasing taxes on the wealthy.  Several socioeconomic factors are explored, but the one I found most interesting is the propensity of people to care more about not being lowest on the totem pole than about the actual amount of money they have.  From the article:

Instead of opposing redistribution because people expect to make it to the top of the economic ladder, the authors of the new paper argue that people don’t like to be at the bottom. One paradoxical consequence of this “last-place aversion” is that some poor people may be vociferously opposed to the kinds of policies that would actually raise their own income a bit but that might also push those who are poorer than them into comparable or higher positions. The authors ran a series of experiments where students were randomly allotted sums of money, separated by $1, and informed about the “income distribution” that resulted. They were then given another $2, which they could give either to the person directly above or below them in the distribution.

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. Those not at risk of becoming the poorest did not seem to mind falling a notch in the distribution of income nearly as much. This idea is backed up by survey data from America collected by Pew, a polling company: those who earned just a bit more than the minimum wage were the most resistant to increasing it.

Poverty may be miserable. But being able to feel a bit better-off than someone else makes it a bit more bearable.

To put it simply Joe the Plumber is much more likely to fight higher taxes on Larry the Lawyer if he thinks the result will be Ernie the Electrician moving from the bottom rung to the same or higher rung on society's ladder.  Of course there are many more reasons why someone would be opposed to higher taxes on the wealthy, but I don't think you can discount the import of peoples' fear, greed or jealousy.