Billionaire Superstar: Public Image and Demand for Taxation

In the United States, there are 741 billionaires with a combined net worth of $5.2 trillion. The fortunes of the ultra-wealthy are far from being hidden from the public eye. In contrast, American billionaires lead public lives. Considering the extreme inequality, some may expect Americans to rally for higher taxes on billionaires. Yet billionaires are estimated to pay lower effective tax rates than the average American. Despite the importance of this issue, there is limited direct evidence on what drives public demand for taxing billionaires. This question matters not only because of the substantial potential for tax revenue, but also due to the growing economic and political influence that billionaires – and the companies they control – exert on the country’s future. In this paper, we conduct a pre-registered survey experiment to study Americans’ demand for taxing billionaires and the companies they founded. We measure the public’s perceptions of billionaires, including their lifestyles, earnings, and business acumen. Furthermore, we use experimental variation to assess whether providing information about billionaires significantly affects the demand for taxation. Subjects were randomly assigned to one of four treatments, each emphasizing a different aspect of billionaires’ public image: the role of merit in building the billionaires’ wealth, their lavish consumption, the scale of their fortunes, and their average tax rates. We then elicited respondents’ preferences for taxing billionaires and their companies, as well as their support for existing policy proposals and their willingness to sign a petition and donate to an organization advocating higher taxes on the ultra-rich. All four treatments significantly and strongly affected the intended beliefs – for instance, information about how the billionaires made their fortunes significantly increased the perceived role of luck. Moreover, all treatments elicited strong emotional reactions. A panel of academic experts predicted that all four treatments would substantially increase demand for taxation. In sharp contrast, we find that only one treatment – providing information about lavish lifestyles – had a robust positive effect on support for taxation, while another – focused on effective tax rates – had a strong negative effect. We discuss implications for both researchers and policymakers.