King's College London

Those earning large amounts for what were viewed by the subjects of a new study as complex roles were taxed at a markedly lower rate than high-earners who were perceived as having routine roles or who gained their income through luck.

In a labour market transformed by information technology and with a growing portion of lower-skilled jobs at risk of automation, study authors believe the results help explain a diminishing appetite for progressive taxation in the knowledge economy, as high-paying roles are viewed as complex and highly technical.

The study, the ICT revolution and preferences for taxing top earners, was co-authored by Dr David Hope, Dr Julian Limberg, and Dr Nina Weber, from King’s College London.

The researchers said: “In our study, we found that subjects were less willing to redistribute away from top earners, and saw their high incomes as more deserved and fairer, when they were the result of complex work.

“The desired tax rate on top earners was 5.3 percentage points lower in the complex work treatment than the routine work treatment. Our results show that there appears to be a widely held and acted upon belief that complex work is more deserving than routine work.”

Data for the study was drawn from an online experiment of more than 3,000 people in the USA.

In the experiment, workers were randomly allocated into groups of five across three scenarios. Five dollars was allocated to one member of each group, and the allocation was decided either through luck (random allocation), performance on a routine slider task, or performance on a complex problems task.

The researchers then gave both the workers and a set of impartial spectators, who did not take part in the first stage of the experiment and had no stake in the decision, the opportunity to tax the top earner and redistribute to the other members of the group.

In their analysis, the researchers found that the impartial spectators’ preferences for taxing top earners depended on the type of work being performed. The desired tax rate on top earners in the complex work treatment was 5.3 percentage points lower than in the routine work treatment.

Meanwhile, among the workers, whose payoffs were directly affected by the redistributive decision, there was no significant differences in preferences for taxing top earners between the routine and complex work treatments.