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Revealed Preference for Redistribution and the Role of Government

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  • Matthias Rodemeier
  • Gregory Sun

Abstract

We study how Americans trade off the welfare of the poor versus the rich using incentivized transfer experiments. Combining this with estimates of the Elasticity of Taxable Income, we quantify optimal income tax rates in the US. Revealed preferences show strong concern for the poor across the political spectrum, implying tax rates far more progressive than existing political agendas. This creates a puzzle: individuals vote for policies that are less progressive than their distributive preferences imply. We trace this puzzle to aversion toward government-mediated redistribution. Liberals’ support for very progressive tax rates is dampened by misuse of public funds, while conservatives object to taxation on principled grounds tied to coercion and property rights. Our paper illustrates that disagreement over redistribution mostly reflects disagreement over institutions rather than over helping the poor.

Suggested Citation

  • Matthias Rodemeier & Gregory Sun, 2026. "Revealed Preference for Redistribution and the Role of Government," CESifo Working Paper Series 12645, CESifo.
    • Handle: RePEc:ces:ceswps:_12645
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    Keywords

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    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • P35 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Public Finance

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