Why Does Alexandria Ocasio-Cortez Support a 70% Top Marginal Tax Rate? What Psychology Says About How Envy and Compassion Motivate Tax Preferences

This month, the newly minted Democratic Congresswomen from New York, Alexandria Ocasio-Cortez (D-NY) suggested levying a 70% tax rate on the rich. After stagflation in 1970s, many had assumed we’d reached a consensus that extraordinarily high marginal tax rates are unsustainable. So why do these ideas keep popping up? Social psychology may help explain why. A recent academic study finds that support for redistribution by taxing the rich to give to the poor is likely driven by several psychological motives including not only compassion but also envy.

In an interview with Anderson Cooper on 60 Minutes Rep. Ocasio-Cortez explained:

You know, it— you look at our tax rates back in the ’60s and when you have a progressive tax rate system. Your tax rate, you know, let’s say, from zero to $75,000 may be ten percent or 15 percent, et cetera. But once you get to, like, the tippy tops—on your 10 millionth dollar— sometimes you see tax rates as high as 60 or 70 percent. That doesn’t mean all $10 million are taxed at an extremely high rate, but it means that as you climb up this ladder you should be contributing more.

Rep. Ocasio-Cortez says the money would be spent on the “Green New Deal” to end use of fossil fuels within 12 years. This would be an ambitious goal, particularly since about 80% of the energy we all currently use in the U.S. comes from fossil fuels. Raised revenue could also go toward her proposal for government-supported health care, and government-paid college. Paul Krugman blessed the idea with his New York Times piece, “The Economics of Soaking the Rich,” saying he believed such a high rate was “optimal.”

What motivates these beliefs of “Soaking the Rich”? Of course, no one can know with certainty what are Rep. Ocasio-Cortez’ true motivations. However, social psychologists in “Support for redistribution is shaped by compassion, envy, and self-interest, but not a taste for fairness,” investigate broadly what motivates people to support income redistribution. In short, they find that envy, compassion, and self-interest drive support for high taxes on the rich. Notably, they find that people who are compassionate are significantly more likely to support redistribution and give charitably. However, envious people support income redistribution but are not more likely to give charitably. This suggests that one way to know if a person’s desire to soak the rich is due to altruism or resentment is to find out if they choose to volunteer or give charitably in their private lives.

The researchers measured support for income redistribution using agreement with statements like “wealth should be taken from the rich and given to the poor” and “the government should increase taxes to give more help to the poor” and “inequality in the distribution of wealth is unjust.” Participant answers to these questions were averaged together to create an average preference for redistribution.

Envy

Then the researchers asked people the extent to which they agreed or disagreed with a series of statements like “It is so frustrating to see some people succeed so easily,” “I feel envy everyday,” or “frankly, the success of my neighbors makes me resent them.” Notice this conception of envy isn’t just about material possessions, but could include envy over others’ perceived social status, prestige, as well as their social accolades. To illustrate how the rhetoric of this might work, consider the opening paragraph in Sam Adler-Bell’s recent article in which his resentment of the rich isn’t necessarily about their material possessions but the fact that Americans like them so much: “Americans have insufficient antipathy toward the extraordinarily rich….We like them too much….Americans persist in seeing extreme wealth as a virtue–a sign of integrity, intelligence, merit. Those who have it garner respect and deference, even reverence.” Thus envy doesn’t always have to be about wanting other’s people’s money, but it could be about wanting their prestige.

The study found that people who were more frustrated with other people’s success and felt more envious of others were significantly more likely to want to increase taxes on the rich and implement redistributive social welfare policies. Perhaps this is why Winston Churchill famously said: “Socialism is…the gospel of envy.” [emphasis added] 

Some might point out that antipathy toward the rich is only against the “unmerited, accumulation of riches,” as Emmanuel Saez and Gabriel Zucman put it, not legitimately earned wealth. This may certainly explain the motivations of some people. However, the fact that the study used generic survey questions about if respondents “feel envy everyday” or feel resentment toward the “success” of generic neighbors shows that for some envy isn’t about frustration with corruption, it’s about resentment.

The researchers ran several follow-up experiments to examine how envy might inform attitudes about increasing taxes on the rich. First, they asked people if they would prefer a scenario in which the rich paid a relatively higher amount in taxes but that generated less tax revenue for the poor OR two, a scenario in which the rich paid a little more in taxes, but less than in scenario one, but that it generated moret ax revenue for the poor. Here is the question wording:

Would you rather (1) have the wealthy pay 50% more in taxes if that generated $100 million for the poor or(2) have the rich only pay 10% more in higher taxes if that generated $200 million for the poor.

Who picked the option that made not only the rich worse off but also the poor? Envious people. Compassionate people were no more or less likely. This finding held in studies they conducted in the United States, India, and the United Kingdom. 

Is this an unrealistic scenario? Not necessarily. In a 2008 Democratic primary debate, then-candidate Barack Obama pledged to increase the capital gains tax. One of the debate moderators, Charlie Gibson, pointed out “…in each instance, when the [capital gains] rate dropped, revenues from the tax increased. The government took in more money. And in the 1980s, when the tax was increased to 28%, the revenues went down.” This did not dissuade Mr. Obama. Instead he responded, “Well, Charlie, what I’ve said is that I would look at raising the capital gains tax for purposes of fairness.” Obama cited that hedge fund managers that year had made a lot of money, that income and capital gains tax rates were different, and that he wanted to implement social programs. But Mr. Gibson further pressed: “But history shows that when you drop the capital gains tax, the revenues go up.” [emphasis added] Obama responded: “Well, that might happen, or it might not.” His mind was unchanged. What’s fascinating about this exchange is Mr. Obama did not contest the history or contend that this time would be different. Instead, he reaffirmed his commitment to increasing capital gains taxes, which are associated with taxing rich people, regardless of the effects.

Compassion 

The researchers also found that compassion contributes to support for income redistribution. This is not particularly surprising, as this is what advocates of redistribution explicitly say they are about. The researchers measured compassion by asking people the extent to which they agreed or disagreed with statements like: “I suffer from other people’s sorrows” or “I feel sympathy for those who are worse off than myself.” Indeed, people who are compassionate are significantly more likely to support income redistribution.

This might lead some to think that those who oppose income redistribution must lack compassion. However, research showsthat conservatives, who are the most opposed to income redistribution, are the most likely to give charitably to both secular and religious causes. This result holds even when accounting for demographic factors like income. Indeed, the researchers also found that people who are highly compassionate were significantly more likely to have voluntarily given money, food, or other material resources of their own to the poor in the past 12 months. This implies that one doesn’t have to support income redistribution to be compassionate.

This suggests that compassion may have two different effects: It may motivate a person to support government-enacted income redistribution, but it might not. Alternatively, it might lead someone to roll up their sleeves and choose to do their part in caring for others. It might lead them to support both.

Further undermining the link between compassion and redistribution is that support for redistribution does not significantly predict giving charitably. This means that people who favor income redistribution are no more likely to personally give charitably, despite their professed support for social welfare programs. Thus, endorsement of the welfare state is not by itself evidence of one’s sincere compassion for the poor.

Putting this altogether: people who are compassionate are significantly more likely to give charitably or to support redistribution for social welfare programs (or both). However, those who support income redistribution are not more likely to personally give aid to the poor. Only compassion predicts giving charitably. The authors write, “compassion, but not envy, predicts personally helping the poor. Envy, but not compassion, predicts a desire to tax the wealthy even when that costs the poor.”

What Doesn’t Motivate Redistribution: Desire for Fairness

Many supporters of higher taxes on the wealthy contend their motivation is “fairness,” as President Obama said in his debate. However, the researchers found that one’s taste for fairness was not a significant predictor of support for redistribution after controlling for the effects of compassion, self-interest, and envy. 

Since people define fairness differently, the researchers defined it in two different ways and measured the impact of both. First, they measured how much a taste for “distributional fairness,” defined as wanting people to have more equal outcomes, predicted support for redistribution. Next, they measured how much a taste for “procedural fairness,” or the desire for every individual be treated the same under the law, predicted support for taxing the wealthy. Across multiple studies, rarely were either conceptions of fairness strong predictors of attitudes toward redistribution. Instead, compassion, self-interest, and envy were the best predictors of how people feel about raising taxes on the wealthy.

Is Taxing the Wealthy More About Resentment or Altruism?

In the previous study, the researchers did not disentangle support for “aid to the poor” versus “taxing the rich.” However, in a dissertation by Spencer Piston submitted to the University of Michigan in 2014, he separates these out. He finds that resentment of the rich strongly and largely predicts support for (1) increasing taxes on those earning more than $250,000 a year, and (2) redistribution by taxing the rich, and (3) reducing the gap between rich and poor. However it has little effect on support for (4) aiding the poor or (5) aiding the homeless. Conversely, sympathy to the poor largely predicts support for giving aid to the poor and homeless, but is not that predictive of taxing the rich. His research implies that support for income redistribution through very high taxes on the rich is more about resentment toward the rich rather than compassion for the poor.

Implications

New York Mayor Bill de Blasio in his State of the City address this month declared “Here’s the truth. Brothers and sisters, there’s plenty of money in the world. There’s plenty of money in this city. It’s just in the wrong hands.” Is this motivated by deeply felt compassion and love for the needy, marginalized, and vulnerable? Or is this really about something darker, rooted in envy and bitterness?

How does one know if a person who advocates for dramatically increasing top marginal tax rates, the estate tax, capital gain rates, etc. is motivated by sympathy for the poor or resentment of the rich? 

We can’t know for certain what’s in a person’s heart. But this research suggests that one should look at what that individual does in their personal life to help others. Do they simply post noble slogans and platitudes on social media about their commitment to justice? Or when no one is watching are they visiting someone in the hospital, bringing a meal to a new mother and father, visiting the elderly, contributing to a local community organization, or babysitting for their neighbor’s kids? Answers to these questions might reveal a lot about whether a person is motivated by altruistic concern for others or resentment of the successful. 

Why should we care about motivations? Because public policy rooted in envy leads to sub-optimal policy outcomes or worse. Envy can lead to bitterness and resentment, and with that can come the rationalization of dehumanization of entire classes of people. And thus quite clearly, can lead to unwise public policy.

Marshall Steinbaum, research director at the progressive Roosevelt Institute recently tweeted, “It’s increasingly clear that having wealthy people around is a luxury our society can no longer afford.” We don’t know for certain what Steinbaum truly meant by this. But it’s not hard to imagine how this kind of rhetoric can turn dark and could be used to justify dehumanization. 

The gospel of envy, as Winston Churchill put it, motivated a great deal of havoc and at times horrific violence throughout the 20th century under the banner of fairness and equality. Compassion is noble and should be encouraged. Envy is not.