The Effects of Solidarity, Income, and Reliance on the State on Personal Income Tax Preferences. The Case of the Czech Republic

Abstract

The current increase in government spending, caused by COVID epidemics and the increasing visibility of leftist political groups in public media, emphasizes the short-term need for sustainable income taxation. In the long run, rising inequality worldwide makes taxation of high-incomes indispensable for sustainable economic development. This paper empirically studies public attitudes on taxation related to income, preferences for solidarity vs. individual performance, and reliance on the state in the Czech Republic. In this Eastern European country, the dichotomies above bear even more importance due to the communist past. We apply the hierarchical regression analysis with smoothing spline transformations to a representative sample of public opinion data (N = 1104, aged 15–95 years, M ± SD: 47.74 ± 17.39; 51.2% women, 18.50% with higher education). The results suggest that income was associated with the perception that taxes for the rich are inadequately high but was unrelated to perceptions of tax adequacy for average and poor groups of respondents. Higher solidarity and reliance on the state were associated with the desire to increase taxation of high-incomes and decrease taxation of poor income groups. Surprisingly, the reliance on the state was associated with a desire to decrease taxation of average-incomes and total taxation while increasing tax progressivity. Preferences for solidarity were associated with higher preferred overall taxation and more tax progressivity. The explanatory powers of preferences for solidarity and reliance on the state in explaining the variation in tax preferences are at least equivalent and, in some cases, twice as large as the explanatory power of the age, gender, education, and income altogether. The results above present new mechanisms that can contribute to sustainable endogenous economic development.