Proposals to increase taxes on the wealthy are having a moment: Polling shows Democrats and Republicans coming together in support of steep taxes on the wealth and income of the super-rich. But there’s one type of tax on millionaires that Americans have consistently been skeptical of: the estate tax. Polling typically shows that a majority of Americans favor repealing this tax completely.
Part of this is due to Republicans’ success in branding the tax a “death tax” that unfairly confiscates wealth from Americans at the time of a family member’s death. But research out of Sweden suggests that many people may simply be unaware of basic facts about inherited wealth.
In the study, researchers from Linnaeus University and the Paris School of Economics administered a nationally representative survey to Swedish adults. The survey included questions about the respondents’ support for an estate tax, which Sweden had until 2004, when it was abolished.
Some respondents received factual information about wealth inheritance in Sweden: that inherited wealth represents about half of all wealth in the population; that those with the highest incomes inherit the most; and that a majority of Swedish billionaires inherited their fortunes. Other respondents were not given this information.
The researchers found that the group receiving the factual information was significantly more likely to support the estate tax than the respondents who didn’t. One implication of the study: Support for an estate tax in wealthy countries may be low simply because many people don’t understand how inherited wealth works.
Pollsters have observed similar dynamics at play in tax discussions in the United States. In 2017, for instance, a HuffPost/YouGov poll asked whether the estate tax should be abolished. Half of the respondents were additionally told that the tax only affects estates worth more than $5 million. Among that group, support for keeping the tax (46%) was nearly 20 percentage points higher than it was among the group not receiving factual information (27%).
That survey also revealed that many Americans had incorrect notions about the estate tax. Only 37% of respondents knew that the tax affects only a few families (less than 0.1% of people who die) each year. Thirty percent believed, incorrectly, that “most” families were subject to the tax. Sixty-three percent incorrectly believed that poor and middle-class families were primarily affected by the tax, even though it applied only to estates worth more than $5 million at the time the survey was administered.
More broadly, other research has shown that Americans have a poor understanding of how wealth is distributed in this country.
A 2010 study found, for instance, that Americans believed that the bottom 60% of the country owned a little more than 20% of the nation’s total wealth. In reality, the bottom 60% owns about 1% of the country’s total wealth. Ninety percent of wealth in the United States is held by the richest 20% of families, with the richest 1% owning 40% of it.