Sarah Berens (University of Innsbruck)

“How Trade Openness Affects Tax Burden Preferences to Sustain Universal Healthcare: A Survey Experiment of Brazil”

Tax schemes in developing countries rely heavily on regressive indirect taxes despite a poor majority. Could prospects of economic gains coming along with trade liberalization usher in new majorities for progressive tax reforms? Classic trade welfare models predict who gains and who loses. We assess if and how this premise of trade openness changes expectations on tax burden preferences to sustain public good provision using a vignette experiment. We analyze data from an original, randomized household survey of 1,008 individuals in Sao Paulo State, Brazil, 2019, to study preferences for increases in personal income, value added, or corporate income taxes to improve funding for the universal healthcare system after Brazil adopts its free trade deal with the European Union. Findings reveal that the trade losing poor have divergent tax instrument preferences than the trade winning poor. Globalization may, thus, create a barrier against more progressive fiscal strategies in emerging economies.