No. 176: Narratives about Fiscal Policy: Are Firm Decision-Makers’ Tax Preferences Driven by Redistribution or Fiscal Consolidation Motives?

Motivated by the increasing frequency with which business leaders publicly express their views on policy issues and by recent findings on the role of narratives in shaping preferences and behaviors, we investigate how narratives affect the tax preferences of firm decision-makers. Specifically, using a large-scale survey experiment (N=7,848), we examine how exposure to narratives of redistribution and fiscal consolidation affects firm decision-makers’ attitudes toward taxes and fiscal stimulus. We find that framing taxes as payments of due debts increases the preference to pay taxes, whereas framing taxes as funds required to cover undue losses is largely ineffective, except for a notable tendency to favor raising the capital gains tax. We also observe a greater preference to pay taxes when decision-makers agree with the stimulus. Our findings on narratives and the channels affecting tax preferences have implications for fiscal policy communication.