Public support for tax policies in COVID-19 times: evidence from Luxembourg

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Abstract

We study attitudes towards the introduction of hypothetical new taxes to finance the cost of the COVID-19 pandemic. We rely on survey data collected in Luxembourg in 2020. The survey asks for the agreement of respondents over: a one-time net wealth tax, an inheritance tax, a temporary solidarity income tax, and a temporary increase in VAT. All questions include different and randomly assigned tax attributes (tax rates and exemption amounts). We find a clear divide with relatively high support for new wealth and inheritance taxes on the one hand and a low support for increases in VAT and income taxes on the other hand. While 58% of respondents agree or strongly agree with a one-time tax levied on net worth, only 24% are in favor of a small increase in VAT. Support for any tax is however negatively associated with the size of the tax as measured by the predicted revenues. Our results indicate that a one-time wealth tax could raise substantial revenues and still garner public support.

Original languageEnglish
JournalInternational Tax and Public Finance
DOIs
Publication statusE-pub ahead of print - 25 Jul 2022

Bibliographical note

Funding Information:
This research was supported by the Luxembourg Fonds National de la Recherche [PREFERME grant C17/SC/11715898; FAREWELL-to-C19 grant COVID-19/2020-2/14864519; and SEI project grant COVID1-19/2020-1/14704944]. We are grateful to the Editor, two anonymous referees, and participants at the University of Luxembourg's IRSEI Brown Bag seminar, the 9th ECINEQ conference, the 77th Annual Congress of the International Institute of Public Finance, the 24th ALdE conference, and the JRC's Fiscal Policy Analysis Unit seminar for helpful comments.

Publisher Copyright:
© 2022, The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature.

Keywords

  • COVID-19
  • Income tax
  • Inheritance tax
  • Preferences for redistribution
  • VAT
  • Wealth tax

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