Preferences for income and wealth limits: Evidence from a survey experiment

Abstract

This paper investigates preferences for imposing maximum limits on top incomes and wealth through a survey-based experiment with a large sample of US and German participants (N = 3,954). We first find that a significant majority favor the introduction of limits to both the income of top executives and the wealth of entrepreneurs (have limitarian preferences). Raising awareness of possible efficiency costs has only a small effect on reducing support for limits, while allowing firms rather than governments to set limits has a larger significant positive impact in the support for income caps. Limitarian preferences are consistent across countries and predict actual voting behavior in a petition that required effort to sign. Then, using a revealed preferences approach, we show that many participants with limitarian preferences are motivated by inequality aversion (weak limitarians), consistent with social preference models. However, a sizable minority of participants support limits even when within-firm income (or within-country wealth) inequality is minimized (strong limitarians). We find that motives that do not usually feature in traditional models, such as the potential negative externalities created by income and wealth accumulation, may partly explain strong limitarian preferences. Interestingly, preferences for wealth caps are more polarized than for income limits, with a higher share of both strong limitarians and those who oppose limits in the wealth domain. Our findings provide new evidence on the structure and motivations behind public attitudes toward executive pay regulation and wealth taxation.