Wealth vs. income inequality: Dutch survey highlights public misconceptions

In most countries, the gap between the rich and poor is much larger when looking at wealth than when looking at income, leading to debates about wealth taxation. However, it is unclear if voters are aware of and understand these differences.

In a large survey experiment with a representative sample of the Dutch population, researchers Thomas Douenne, Oda Sund, and Joël J. van der Weele examined voters’ perceptions of income and wealth distributions. They also compared these perceptions with actual administrative data on respondents’ own income and wealth.

Key findings

• While the academic literature makes a prominent distinction between income and wealth taxation, such arguments are not reflected in the views of the general public, at least in the Netherlands.
• Even after being given a note at the beginning of the survey explaining what income and wealth are, respondents underestimated the gap between the top 10% share of income and wealth by a factor of 10.
• People often used information about income to predict wealth distribution and vice versa, showing confusion about the two types of inequality.
• Delivering an intervention about actual inequality levels and personal ranks in the income/wealth distribution affected people’s perceptions of inequality and its fairness, but had little effect on their policy preferences.
• This matters to the policy debate on inequality: the lack of awareness of wealth inequality might explain why wealth taxes have become less popular in OECD countries over the past few decades. To build support for specific policies, such as taxes on inheritances or capital gains, politicians will need to better explain and emphasize the differences between income and wealth inequality.

AUTHORS

• Thomas Douenne, University of Amsterdam, WID Fellow
• Oda Sund, University of Amsterdam
• Joël J. van der Weele, University of Amsterdam

MEDIA CONTACT

• press[at]wid.world