Who wants a progressive income tax? Determinants of tax-policy preferences in Post-Socialist Eastern Europe | Mannheimer Zentrum für Europäische Sozialforschung

Stefan Domonkos
Who wants a progressive income tax? Determinants of tax-policy preferences in Post-Socialist Eastern Europe

East European Politics and Societies, 2016: 30, Heft 2, S. 423-448
ISSN: 0888-3254 (print); 1533-8371 (online)

Using multi-level modeling, this study investigates the determinants of public opinion on personal income taxation (PIT) in Central and Eastern European countries. The analysis finds that socio-economic and demographic variables, such as household income, occupational social class, and age, are important in determining PIT preferences. However, beliefs about fairness and perceptions of corruption also play a significant role. Support for progressive taxation decreases with the acceptance of income differences as a reward for talent and effort. Also, distrust of the legal system and a conviction that tax authorities treat certain people more favorably than others increase support for progressive taxation, although this latter effect is constrained to the less affluent. These results indicate that progressive PIT might be understood by the public as a corrective measure vis-à-vis inequalities arising due to corruption. The study finds little evidence for the importance of country-level variables, such as income inequality or the institutional features of income tax systems. Nevertheless, there is a moderately strong association between overall economic development and average support for progressive taxation. The public in less developed post-socialist countries are more in favor of non-redistributive forms of taxation, such as the flat tax and lump-sum taxation. This tendency may reflect their increased willingness to accept neoliberal reforms under circumstances of growing pressure to improve the international competitiveness of the domestic economy.