Stated preferences for capital taxation - tax design, misinformation and the role of partisanship

Although theoretical research on optimal capital taxation suggest to incorporate public opinions, the empirical literature on preferences regarding capital taxation almost exclusively focusses on the emotionally loaded estate tax. This paper presents a more comprehensive investigation of preferences towards different, tangible instruments of capital taxation beyond the estate tax. In particular, we focus on the effects of tax-specific design features and personal as well as asset-related characteristics. For this, we conducted a factorial survey experiment with over 3,200 respondents on Amazon's Mechanical Turk (MTurk). By using different tax instruments as reference points for each other we strengthen the robustness of our findings. While our results confirm well-established findings of previous literature, we show that the specific design of tax instruments is indeed decisive for preferences over capital taxation. Whereas proposed effective tax rates of the estate tax and the one-time wealth tax show a significant progressivity, there is no clear pattern for both periodical taxes. Furthermore, preferences depend on the respondents' characteristics, especially their partisanship. Democrats clearly prefer concentrated over periodical capital taxes, Republicans' only articulated preference refers to the particular rejection of the estate tax. Remarkably, this opposition does not hold for a perfectly congruent one-time wealth tax. This result provides novel empirical evidence for drivers of the opposition towards the estate tax beyond mere misinformation discussed by previous literature: emotional charge potentially triggered by political framing.