Electoral Studies 24 (2005) 393–408

www.elsevier.com/locate/electstud

Income tax and elections in Britain,1950–2001q

Paul Johnsona,�, Frances Lynchb, John Geoffrey Walkera

aDepartment of Economic History, London School of Economics, Houghton Street,

London WC2A 2AE, UKbDepartment of Social and Political Studies, University of Westminster, 309 Regent Street,

London W1B 2UW, UK

Abstract

The level of income tax has been an important campaigning issue in every election in

Britain since 1950, and the tax record of government is widely held by politicians to bea determining factor in electoral outcomes. Political scientists, on the other hand, generallydismiss these views, and argue instead that taxation has not had a significant influence on

voting behaviour in Britain. We examine the background to these divergent opinions, andshow that they are based on inappropriate data about the incidence of income tax. Weconstruct new time-series data on income tax trends for different income levels and household

types, and then conduct statistical tests for any relationship between these tax data andelection results. We show that there is no relationship between changes in the standard (orbasic) rate of income tax and election results, but that there is a clear link at the aggregate level

between the effective (or average) tax rate and electoral outcomes – an increase in the effectivetax rate is associated with electoral defeat. We thus conclude that political scientists have beentoo ready to dismiss the perceptions of politicians that electoral behaviour is influenced bychanges in income tax.

� 2004 Elsevier Ltd. All rights reserved.

Keywords: Britain; Elections; Taxation; Economic voting

q The research on which this paper is based has been supported by a grant from the Leverhulme Trust.� Corresponding author. Tel.: C44 20 7955 7061; fax: C44 20 7852 3630.

E-mail address: p.a.johnson@lse.ac.uk (P. Johnson).

0261-3794/$ - see front matter � 2004 Elsevier Ltd. All rights reserved.

doi:10.1016/j.electstud.2004.10.008

394 P. Johnson et al. / Electoral Studies 24 (2005) 393–408

1. Introduction

Politicians and political scientists appear to hold different sets of beliefs about therelationship between taxation and voter behaviour. According to Rose and Karran(1987: 161), ‘‘studies of voting behaviour in Britain consistently find that taxationdoes not have a significant influence on voting behaviour’’. Yet in every electioncontest over the five decades from 1951 to 2001, politicians have made the taxsystem, its fairness or otherwise, and the threat of tax increases or the promise ofreductions, a prominent campaign issue. This article uses new data on income taxespaid by a variety of British households to revisit the perplexing question of whethertaxation has any impact on voter behaviour. We focus on income tax because it ishighly visible, and because it is the tax which consistently receives greatest attentionduring election campaigns. We use different indicators of income tax to trace bothbeliefs about the tax and the actual experience of income taxation.

We begin by reviewing the (rather thin) literature on taxation and voterbehaviour, and by outlining the electoral debates over taxation in the period since1951. We then introduce our new time-series data on income tax derived froma micro-simulation model of personal taxation. Tax trends for different income levelsand household types are presented graphically, and we then conduct statistical testsfor any relationship between these tax data and election results.

2. Taxation and voter behaviour

Analysis of the impact of taxation on voter behaviour is typically subsumedwithin a broader discussion of the impact of economic factors on electoral outcomes.Since the classic work of Downs (1957) it has been widely accepted that voterbehaviour will be affected by both ideological and economic factors. At the broadestlevel it appears that voters support governments which deliver (or which arefortunate to be associated with) prosperity, and penalise governments associatedwith economic decline or failure, as represented, for example, by a high and risingunemployment rate (Lewis-Beck, 1981). However, the large literature on economicvoting has failed to identify a relationship between economic performance andpolitical popularity which is stable across countries, or even within a single countryover time (Lewis-Beck and Paldam, 2000). This instability has been attributed to atleast five separate factors.

First, although the idea of economic voting is premised upon the belief thatvoters hold government responsible for economic events, this concept of‘responsibility’ is itself ambiguous, particularly in multi-party systems whichproduce coalition governments (Anderson, 2000). Secondly, if an economic policyproduces opposite outcomes for an individual voter and for the economy asa whole, it is not clear whether the voter will base her ballot-box decision onpersonal or on national economic outcomes. Initial studies by Kinder and Kiewiet(1981) on US data found voters to be sociotropic (driven by evaluation of the

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performance of the national economy), but subsequent work on Danish and Britishdata finds voters to be mainly egotropic (driven by evaluation of personal financialcircumstances) (Nannestad and Paldam, 1997; Clarke et al., 2000): it seems that thenational context has an important but little understood influence. Thirdly, it isunclear whether voters are retrospective in their attitudes, basing their votingdecisions on past government performance, or whether they are prospective,recognising that their future economic welfare will be affected by future economicpolicy decisions; again, this may vary by time and place. Fourthly, since the levelof economic knowledge among voters appears to be low (Paldam and Nannestad,2000), economic voting may be determined by perceptions about the economyrather than the real state of the economy (Sanders, 2000). As there is no particularreason to expect the relationship between economic perceptions and economicreality to be stable over time, or identical across countries, this adds anotherpotential cause of instability to the economic voting relationship. Finally, theleverage that economic factors have on voting behaviour may be small relative toother factors, such as ideological commitment, or the personality of politicalleaders, and may be obscured by these other effects. On the other hand, as Sandersand Brynin (1999) have noted, the ideological position of individual voters mayitself be influenced by both objective and subjective economic factors, which makesthe traditional separation of ideological and economic influences on voterbehaviour somewhat problematic.

The fragility of the influence of economic factors on voter behaviourcompounds the difficulty of identifying any specific relationship between taxationand voting, given that taxation is just one element of a government’s economicpolicy. In fact, in the economic voting literature, it is widely assumed thatunemployment, inflation and the rate of economic growth – rather than taxation –are the policy areas most likely to win or lose support for incumbent governments(Chappell and Veiga, 2000). Furthermore, tax systems exhibit considerablenational variation, with, for example, the proportion of total tax revenue derivedfrom income tax as low as 15.2 per cent in the Netherlands in 1998, and as high as51.6 per cent in Denmark (OECD, 2000). It might therefore be expected that anyleverage of income tax on voter behaviour would also vary across countries. In thespecific case of Britain, one study by Sanders (1996), which uses an indicator of theburden of personal taxation derived from the CSO’s tax and price index to modelthe effect of taxation on the popularity of the (then incumbent) Conservative party,revealed a small negative impact of taxation on popularity. This effect, however,was found to be minor relative to the role of popular perceptions of theConservative party’s ability to manage the economy. In other studies it has beenstrongly argued that taxation cannot be a significant influence on voter behaviour,because attitudinal surveys throughout the 1980s consistently found a largemajority of respondents to be in favour of tax increases, even though theelectorally successful Thatcher governments advocated tax cuts (Miller et al., 1990:111, 165). Nevertheless, despite this scepticism among political scientists, Britishpoliticians appear to hold deeply ingrained beliefs that voters respond to promisesand policies about tax.

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3. Tax and elections, 1951–2001

Tax policy was central to the Conservative and Labour election campaigns of1992 and 1997, but the issue has been present at every post-war election. In 1992Labour entered the election campaign with a commitment to raise income tax andsocial security contributions on high earners. John Smith, the Labour shadowchancellor, claimed that this policy would make 8 out of 10 people better off, but exitpolls found that fewer than a third of voters believed they would benefit fromLabour’s tax plans, while 49 per cent believed they would be made worse off (Butlerand Kavanagh, 1992: 103, 147). Meanwhile, the Conservatives could argue that theirnew lower income tax rate of 20 per cent, announced in the budget the day before theelection campaign began, would benefit workers on the average manual wage byalmost £3 per week – a clear example of tax advantage targeted at a crucial group ofmarginal voters (Jones, 1992: 12, 86). The fear of ‘Labour’s tax bombshell’ (a highlyeffective Conservative election slogan) was widely believed to have clinched victoryfor John Major’s Conservative government in 1992. According to Philip Gould,a key Labour Party strategist, ‘‘tax was a fetish for us. We were certain we had lostelections in the past partly because of tax’’ (Gould, 1998: 7).

Subsequent analysis of survey data by Heath et al. (1994: 292) found ‘very littleevidence’ of tax being a key factor in Labour’s defeat, but the leadership of theLabour party believed otherwise. New Labour decided to ‘slay the high-tax dragon’in advance of the next election. In January 1997 Gordon Brown, the shadowchancellor, made a pledge to rule out any changes in basic and higher rates of incometax for the duration of the next parliament (Jones, 1997: 74). Although this pledgesignificantly constrained the policy options of the first Blair government, it washighly effective in distancing Labour from its popular image as the party of hightaxation.

This image was of long standing. In the 1964 election the ConservativeChancellor, Maudling, produced a long list of the taxes - including an increase inincome tax by 9d (3.75 per cent) – required to pay for Labour’s election programme.‘‘If this is the price of Harold Wilson’’, he said, ‘‘it is a price too high to pay’’ (Butlerand King, 1965: 124). Similar arguments had been made before. At the 1959 electionthe Conservative manifesto boasted: ‘‘we have cut taxes in seven Budgets, whilstcontinuing to develop the social services’’ whilst a defensive Labour partycomplained that ‘‘Tory propagandists allege that a Labour Government wouldhave to put up taxes in order to pay for these improved social services. This is quiteuntrue’’(Craig, 1975). In 1955 the Conservatives emphasised their record of tax cuts,with 62 per cent of their election candidates mentioning past tax cuts in their electionaddresses, and 25 per cent mentioning future tax cuts, whereas only 47 per cent ofLabour candidates mentioned tax, and then mainly to criticise Tory policy ofreducing taxes for the well to do (Butler, 1955: 32).

The association of the Conservative Party with tax cuts long pre-dated theThatcher era. At the 1950 election, the Conservative manifesto argued that‘‘socialism has imposed a crushing burden of taxation . In order to lower taxesand the high cost of living we must cut down government expenditure’’, while the

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Labour manifesto failed to give taxation a single mention (Craig, 1975). At theConservative party conference in 1967 the shadow Chancellor, Iain McLeod,reminded the party faithful: ‘‘First, we stand and we have always stood for policiesof lower personal taxation’’ (Conservative Party, 1967: 82), and in the campaignguide for 1970 Edward Heath emphasised that Labour was ‘‘pledged and committedto more and more taxation’’, whereas the Conservatives would pursue a policy of taxcuts (Conservative Party, 1970). But it was at the 1979 election that the ConservativeParty most wholeheartedly embraced the low-tax idea with Margaret Thatcher’sunambiguous election commitment that ‘‘We shall cut income tax at all levels’’. Bycomparison, Labour’s muted promise to reduce the burden of income tax, togetherwith its explicit pledge to introduce an annual wealth tax, did little to weakena popular perception of Labour as the high-tax party (Craig, 1990). As Butler andKavanagh (1980: 188) noted, ‘‘People believed that the Conservatives would bringtaxes down: the party’s polls indicated that there was a response to the theme of SirGeoffrey Howe ‘Every Labour government puts taxes up. Every Conservativegovernment gets taxes down’’’.

It seems clear from the electoral rhetoric of taxation that politicians believe votersrespond to the tax issue. It also seems clear that politicians have been unconcernedby many of the complicating factors identified by political scientists in their extensiveanalysis of economic voting. Within the two-party British parliamentary system,there has been little ambiguity about who is responsible for national tax policy. Norhas there been much doubt about elector motivation: Conservative tax promiseshave been directly designed to appeal to egotropic rather than sociotropic voters(Heath et al., 2001: 44). The well-documented lack of public awareness about thestructure of the British tax system and the overall level of the tax burden (Lewis,1982; Fabian Society, 2000: 45) has not been a binding constraint on the use of tax asa major election issue, which may indicate that voters respond only to highly visiblepersonal taxes (primarily income tax, although the controversial and short-lived PollTax was a major political issue in 1989–90). Finally, the way politicians have usedtax as an election issue suggests that they believe voters to be both retrospective andprospective in their outlook, taking note of the long-run tax histories of the twomajor parties, but also responding to immediate tax promises.

4. Income tax, 1951–2000

In order to resolve the question of whether politicians or political scientists havebeen right about the link between taxation and votes in post-war Britain, we needfirst to develop relevant and consistent indicators of the tax regime faced by voters.This is not as simple as it sounds. One fiscal indicator regularly reported by theOECD and used in some tests for the existence of economic voting is total taxationas a proportion of GDP. It is difficult to conceive how this ratio of economicaggregates could have a bearing on the decision-making of individual voters: it isseldom referred to beyond a narrow range of academic and technical publications.Furthermore, both constituent parts of the ratio are only tangentially linked to an

398 P. Johnson et al. / Electoral Studies 24 (2005) 393–408

individual’s experience of the tax system. Total national tax revenue is made up ofa mixture of indirect and direct taxes, levied on both individuals and businesses,located both within and beyond the nation’s borders. High rates of direct personaltaxation can be compatible with either high or low overall levels of tax revenue,depending on the structure of a nation’s fiscal regime. In addition, labour income asa proportion of GDP varies across countries, so even if all tax revenue were derivedfrom personal income taxes, a common rate of income tax across countries couldproduce different ratios of tax to GDP (and vice versa).

A more direct and meaningful indicator of an individual’s tax burden is requiredfor a convincing test of the relationship between taxation and voting. Early work onthe impact of taxation on political behaviour by Wilensky (1976) argued (on thebasis of US evidence) that ‘tax revolts’ are stimulated not so much by the magnitudeof the total tax burden, but instead by the visibility of these taxes. Following thislogic, we have taken income tax to be the most likely determinant of any consistentvoter response to fiscal policy. This seems to accord with the views of politicians.For example, in 1988 the Chancellor of the Exchequer, Nigel Lawson, boasted thatafter his income tax cuts ‘for the first time in our adult lives, Britain is a low taxcountry’ (Lawson, 1988: 15). In fact the total tax burden in 1988 was higher than in1979 when the Conservative government came into office; it is clear that as far asLawson was concerned, a ‘low tax’ regime was defined solely by the level of incometax.1

Having identified income tax as the most consistently visible indicator of the fiscalregime faced by voters, we then have to determine what specific measure of incometax is the most appropriate for testing the relationship between tax and voting. Onesimple measure – the standard or basic rate of income tax – allows us to tell a simplestory about the course of UK taxation over the last fifty years.2 The highest standardrate was in place between 1951 and 1953, when it stood at 47.5 per cent (9s. 6d. in the £),since when it has fallen – with some minor reversals along the way – to reach 22 percent today.

However, the history of income tax payments since the Second World War ismore complex than this, for two reasons. First, the actual proportion of a person’sincome that is paid in tax – the effective tax rate – is dependent not only on the rateof tax, but also on income levels and tax thresholds and allowances. As we will showbelow, even for an individual on average income, there need not be a directrelationship between the standard rate of income tax and the effective rate levied onthat person. Secondly, measures other than either the standard rate or the effectiverate may give a more meaningful picture of how the income tax system impacts onindividuals. It is possible, for example, that voters might respond to changes in the

1 Employees’ National Insurance contributions also constitute a direct deduction by the government

from workers’ pay, but since these contributions are widely perceived to be a payment for public services

rather than a general tax payment, and since they have seldom entered into the political rhetoric of

taxation, we have excluded them from our analysis here.2 Until 1972 the term ‘standard rate’ was used in UK tax legislation; thereafter the term ‘basic rate’. For

simplicity we use the term ‘standard rate’ throughout.

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marginal tax rate (the proportion of any additional pound of income paid in tax) inways that differ from their responses to changes in the standard or effective rates.

It is clear from this discussion that in order to evaluate the impact of income taxon voter behaviour since the 1940s we need to know not just what has happened tothe standard rate, but also how both the effective and marginal rates of income taxhave evolved. Effective and marginal income tax rates will vary according topersonal circumstances (level of income, marital status, number of dependants), sowe need some way of tracing the evolution of these tax rates over time for a varietyof individuals. Information on effective and marginal income tax rates is nowregularly produced at the time of the annual Budget by, amongst others, the Institutefor Fiscal Studies, but no long-run data of this sort exists. We have thereforeconstructed a simulation model to derive details of individual tax burdens since 1948from information about tax rules.3

Whereas most simulation models are designed to project an unknown future, oursis intended to reconstruct an actual – but unrecorded – past. We know that incometaxes were levied and paid, we know that for the great majority of taxpayers thisprocess occurred automatically through deduction of income tax at source byemployers, we know that the process was rule-based, and we know, from InlandRevenue publications, exactly what these rules were in each tax year. Our modelsimply applies the income tax rules that were used by the Inland Revenue in anyparticular tax year (including all details of tax thresholds and allowances and, priorto 1973, full details of the surtax system) to households of any chosen income leveland structure. This allows us to re-create the details of a past event (an annual taxpayment) which we know took place, but for which no record has been retained.Thus it enables us to determine the actual income tax that would have been paid ineach year from 1950 to 2001 by, for instance, a married man with a non-workingwife and two dependent children who received a wage consistently equal to 75 percent of average earnings. It also allows us to calculate the marginal tax rate for eachindividual or household.

Fig. 1 presents an initial view of the evolution of UK income tax rates since 1949.The top line clearly shows the declining trend of the standard rate of income taxfrom its peak in 1951–3. However, this graph shows that the standard rate givesa quite misleading representation of the course of personal income tax for a workeron average earnings. When the standard rate was 47.5 per cent, a single person onaverage earnings was paying just 13 per cent of their total income in income tax, anda married man with two dependent children was paying a trivial one per cent. Theeffective income tax rate for a single person on average earnings peaked in 1977 at 28per cent, and for a married man with two children it peaked in 1982 at 19 per cent.

It is immediately clear that the political rhetoric of tax cuts does not coincide withthe experience of income taxation for a person with average earnings. When theConservatives boasted in 1959 that they had ‘cut taxes in seven Budgets’ they couldpoint to the decline in the basic rate of income tax to support this claim, whereas in

3 More details of the simulation model, EuroPTax, can be found at http://www.lse.ac.uk/collections/

economicHistory/raw/euroPTax//. The model covers income tax data for the UK, France and the

Netherlands.

400 P. Johnson et al. / Electoral Studies 24 (2005) 393–408

fact the effective rate of taxation for average earners had risen fairly consistently – ifmodestly – throughout the 1950s. Even Margaret Thatcher’s 1979 promise to ‘cutincome tax at all levels’, which was widely believed to have been honoured, turns outto have been broken, at least for a two-child household on average earnings, whichsaw its effective income tax rate rise from 18 to 20 per cent between the 1979 and1983 elections.

Fig. 2 presents data for the same average income households, but now comparesthe standard rate with the marginal rate of income tax. These rates converge in thelate 1960s, when tax allowances for married men were scaled back, and are identicalfrom 1973 when a unified system of income taxation replaced the combined income

Fig. 2. Marginal tax rates for men on average earnings, 1949–99.

Fig. 1. Standard and effective income tax rates for workers earning average incomes in the UK, 1949–1999.

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tax and surtax system (Kay and King, 1983). However, they are highly divergentthrough the 1950s and 60s, when the marginal rates for people on average earningsfluctuated widely over short periods (largely due to an erratic and laggardly processof uprating the thresholds of the various income tax bands to take account ofinflation and earnings growth).

It must be stressed, however, that the experience of effective and marginal taxrates can vary greatly according to level of income. Fig. 3 illustrates this by reportingthe effective tax rate for a single man at five different points of the incomedistribution – at 75 per cent of average earnings (equivalent to a low-paid unskilledmanual worker), at 150 per cent (equivalent to a highly skilled manual worker ormid-level white-collar worker), at 200 per cent (equivalent to mid-careerprofessionals) and 400 per cent (equivalent to very senior managers or professionals),as well as at 100% of average earnings. Approximately 60 per cent of taxpayers haveincomes between 75 and 150 per cent of the average (Inland Revenue, 1998: 33).

Fig. 3 shows that, while the general trend for all five income groups was a rise inthe effective tax rate until the mid-1970s, and a decline thereafter, the details variedby income level. For the lowest income band, on 75 per cent of average earnings, theeffective rate more than doubled from under 9 to 25 per cent between 1954 and 1976,whereas for persons earning twice average income, the rate rose from 23 to 33 percent. The highest income band (400%) experienced more-or-less unchanging effectiverates from 1949 to 1963 and from 1989 to 1999. In the intervening period, however,there was a sharp increase in tax rates in the mid-1970s, and a sharp decline after thereduction of the top rate to 40 per cent in 1988.

Figs. 1–3 reveal a complex history of income tax liability in the UK over the lasthalf-century – far more complex than data on the total share of tax in GDP, or onthe standard rate of income tax, would suggest. Nevertheless, it is not possible todiscern from the graphs whether there is any consistent relationship between

Fig. 3. Effective tax rates for a single man at various proportions of average earnings in the UK, 1949–99.

402 P. Johnson et al. / Electoral Studies 24 (2005) 393–408

movements in the effective and marginal tax rates and general elections. Todetermine whether voters have responded to politician’s manipulation of or rhetoricabout income tax, we need to move from visual to statistical analysis.

5. Statistical analysis

If politicians are correct in their belief that voters respond consistently to incometax policy, we should see a clear pattern in general election results, with high rates oftax increase associated with electoral failure for the incumbent party, and tax cutsleading to electoral success. However, there are no a priori grounds for determiningwhich of the three measures of income tax – the standard rate, the effective rate, orthe marginal rate – should be most closely tied to voter behaviour. The standard rateis the simplest indicator, and the one often referred to in newspaper headlines onbudget day, but, as noted above, it is not the sole, or even the primary, determinantof the amount of income tax actually paid by each taxpayer. The effective rate isprobably the measure that most clearly reflects the impact of the income tax systemon an individual’s financial well-being, and it is readily ascertainable by comparingthe gross and net earnings figure on the weekly or monthly pay slip. The marginalrate is the most relevant for an individual in assessing the tax liability on futureincome growth, but it is likely to be known and understood only by those who havean unusually well-developed knowledge of the UK tax system. In the analysis belowwe therefore conducted tests for the relationship between all three tax measures andelectoral success.

Our statistical analysis is constrained by the small number of observations – justfourteen general elections between 1951 and 2001. We began by conducting a one-way analysis of variance (ANOVA) between inter-election changes in the standardrate of income tax (StT) and election results. For our change of government variable,GOV, we assigned a value of 1 to elections which led to a change in government, and0 otherwise, and we then looked to see whether elections in which the governmentchanged were associated with a (larger) rise in income tax than were elections inwhich the incumbent government was re-elected; results are presented in Table 1. Onaverage the standard rate of income tax fell by 2.6% between elections in which theincumbent government was returned to office, and fell by only 0.29% betweenelections in which the government was voted out of office. However, this result is notstatistically significant, and this confirms that electoral outcomes are unrelated tomovements in the standard rate of income tax.

Table 1

ANOVA between election results (GOV) and change in the standard rate (StT) of income tax, 1951–2001

GOV Variable Mean s.d. Freq F ProbOF

0 StT �0.0266 0.0313 8 2.19 0.1645

1 �0.0029 0.0268 6

403P. Johnson et al. / Electoral Studies 24 (2005) 393–408

We then moved on to test for a relationship between GOV and our other incometax indicators. Changes between elections in the effective rate of income tax (EffT)and the marginal rate (MargT) have been calculated for both single persons (EffTS,MargTS) and a married man with two dependent children (EffTM, MargTM).Furthermore, we have calculated these effective and marginal rates for single andmarried persons at five different levels of income: 75, 100, 150, 100 and 400 per centof average male earnings. The effective tax rate for a single person on 75 per cent ofaverage earnings thus can be indicated by EffTS75, and so on for other incomelevels; pooled results across all five income levels are designated EffTSall.

Table 2 presents ANOVA tests for a relationship between GOV and effective andmarginal rates for both a single and married man, on the basis of pooled resultsacross the five income levels indicated above. Since it is clear, from Fig. 3, that taxrates vary by income level, and since we have no prior beliefs about how therelationship between voter behaviour and income tax may vary by income level, thisis an appropriate way to explore the data for any underlying statistical relationships.Changes in the marginal tax rate between elections appears to be completelyunrelated to GOV; the means have the wrong sign, and the relationship lacks anystatistical significance for either single or married taxpayers. For the effective taxrate, however, there is a weak but statistically significant difference in mean inter-election change and in the likelihood of an incumbent government being re-elected.Results are stronger for married persons: re-election is associated with a constanteffective tax rate between elections, while losing an election is associated with aninter-election income tax increase of 1.9 per cent.

Of course, the UK’s ‘first past the post’ electoral system means that voter supportis not linearly related to electoral outcomes. For example, Labour won the 1950election with a 2.1% reduction in its share of the total vote relative to 1945, but itlost the 1951 election despite a 2.6% increase in its share of the vote. We havetherefore also tested for a relationship between the change in the share of the votereceived by the incumbent party (VOTE) and changes in the tax rate across the fiveincome levels. Because VOTE is a continuous variable, we have been able to useOLS; these results are reported in Table 3. In no case is there any significantrelationship between VOTE and any of the tax variables.

Table 2

ANOVA between election results (GOV) and changes in effective (EffT) and marginal (MargT) rates of

income tax for single and married persons, pooled across 5 income levels, 1951–2001

GOV Variable Mean s.d. Freq F ProbOF

0 EffTSall �0.0036 0.0225 40 4.33 0.0412

1 0.0077 0.0225 30

0 EffTMall 0.0000 0.0202 40 15.34 0.0002

1 0.0192 0.0201 30

0 MargTSall 0.1534 0.9529 40 2.76 0.1012

1 �0.2064 0.8148 30

0 MargTMall 0.0317 2.551 40 0.02 0.8981

1 �0.0285 0.2474 30

404 P. Johnson et al. / Electoral Studies 24 (2005) 393–408

Given that the tax experience of these different income groups is nothomogeneous, it is appropriate to look at the data for different income levels tosee whether the statistical results are driven by outliers related to particular incomegroups. An ANOVA decomposition exercise was carried out by omitting in turneach of the five income groups from the analysis. A change in the significance of theresult contingent on the omission of any one income group would indicate particularsensitivity of that income group in the overall analysis. This stepwise analysis failedto identify any change in the results for marginal tax rates – they remainedinsignificant. For the effective rate, however, results became statistically insignificantwhen the rates for higher-income single person households – those on 200% and400% of average income – were excluded from the analysis, but results remainedsignificant for married person tax rates across all income levels. In fact, as Table 4shows, when the five income levels were grouped into those up to and including150% of average earnings, and those greater than 150% of average earnings, it wasfound that the changes in the effective tax rate for single persons in the former groupwere not statistically significant. This division into higher and lower income groupsroughly delineates those households subject to surtax prior to 1973 or to higher rateincome tax since 1973.

Table 4 shows that, for both income groups, elections in which the incumbentgovernment lost were associated with a sizeable average increase in the effective taxrate for married persons of 1.9%, whereas those in which the government was re-elected were associated with a very small increase (0.3% for the lower income group)

Table 3

OLS regressions between VOTE and change in tax variables, 1951–2001

Variable Coeff S.E. F ProbOF N

StT 4.092 39.43 0.01 0.919 14

EffTSall �0.7665 21.57 0.00 0.972 70

EffTMall �38.32 21.89 3.06 0.085 70

MargTSall 0.8670 0.5372 2.60 0.111 70

MargTMall �0.0117 0.2582 0.00 0.964 70

Note: equations were estimated with a constant, but these values are not reported.

Table 4

ANOVA between election results (GOV) and changes in effective (EffT) and marginal (MargT) rates of

income tax for higher income (400%, 200%) and lower income (150%, 100%, 75%) groups, 1951–2001

GOV Variable Mean s.d. Freq F ProbOF

0 EffTS75C100C150 0.0008 0.0204 24 0.22 0.6438

1 0.0038 0.0209 30

0 EffTM75C100C150 0.0030 0.0157 24 7.97 0.0074

1 0.0191 0.0201 30

0 EffTS200C400 �0.0102 0.0243 16 6.49 0.0171

1 0.0135 0.0245 12

0 EffTM200C400 �0.0043 0.0256 16 7.19 0.0126

1 0.0194 0.0193 12

405P. Johnson et al. / Electoral Studies 24 (2005) 393–408

or decrease (�0.4% for the higher income group) in the effective tax rate. Inaddition, for single person tax rates for the higher income group only, electionsin which governments retained office were associated with average reductions ineffective tax rates of 1.02% compared to an increase of 1.35% for elections which thegovernment lost.

It is possible that these results are driven by omitted variables. As noted above,models of economic voting most often identify unemployment, inflation andeconomic growth, rather than taxation, as being the factors most likely to affectvoter behaviour. We have therefore carried out similar ANOVA analysis betweenGOV and several indicators of these other economic variables. We have tested forany relationship between GOV and the level of inflation (I) and (U) at each election,the inter-election changes in the level of inflation (dI) and unemployment (dU), andthe growth in real earnings between elections (dY). Results are reported in Table 5;in no case could we find any significant relationship between GOV and any of theseeconomic variables.

6. Interpretation

This paper has identified a strong and enduring dissonance between the views ofpoliticians and of political scientists about the electoral potency of taxation inBritain since the Second World War. Politicians have spoken and acted as if the rateof income tax is a key determinant of voter loyalty, whereas political scientists haveconcluded that taxation has been electorally unimportant. The justification for thepolitical science consensus comes from opinion poll data (Gallup and British SocialAttitudes Survey) which is consistent in showing that, from the late 1970s at least,a significant and rising majority of the electorate has preferred constant or increasingpublic expenditure over tax cuts (Heath et al., 2001: 45, 54). The justification for thepoliticians’ perspective comes from their political instinct, together with the opinionsthey encounter on doorsteps and in focus groups.

Table 5

ANOVA between GOV and indicators for unemployment, inflation and growth of earnings, 1951–2001

GOV Variable Mean s.d. Freq F ProbOF

0 U 5.325 4.056 8 1.30 0.2768

1 3.233 2.168 6

0 dU 0.5250 2.55 8 0.32 0.05807

1 �0.1333 1.398 6

0 I 4.962 5.099 8 0.87 0.3702

1 7.299 3.932 6

0 dI �1.313 5.155 8 1.39 0.2612

1 1.583 3.523 6

0 dY 3.193 2.378 8 0.10 0.7556

1 2.794 2.241 6

406 P. Johnson et al. / Electoral Studies 24 (2005) 393–408

The problem with the opinion poll data is that it is not directly related to voterbehaviour. As Heath et al. (2001: 46) have noted, ‘‘electors may feel that higher taxesand greater public spending are indeed what the country needs, but in the privacy ofthe polling booth they may decide to follow their own self-interest’’. In other words,their sentiments may be sociotropic when responding to pollsters, but theirbehaviour may become egotropic when casting their vote. In this paper we finessethis potential problem of opinion poll data by searching for direct statisticalrelationships between tax changes and voter behaviour.

Such relationships have not been identified in previous research, but this is notsurprising, since the indicators that have been used have been inadequate to the task.The overall share of tax in GDP is a composite statistic which is unlikely to have anydirect relationship to the fiscal experience of voters. Even the standard rate of incometax is an inappropriate measure because, as shown in Fig. 1, it is not directly relatedto the effective tax rate experienced by tax-payers. In order to obtain relevant taxindicators, we have used a simulation model to determine the time path of theeffective and marginal tax rates for different household types and for differentincome levels over the post war period. Any positive and significant statisticalrelationship between increases in taxation between elections and a change ofgovernment would lend support to politicians’ belief that income tax policy hasa direct electoral impact.

Our statistical tests show that claims by political scientists that taxation does nothave a significant influence on voting behaviour are sustained with respect to boththe standard rate of income tax and to the marginal rate of income tax. On the otherhand, we find clear support for the instinctual feelings of politicians that tax mattersat election time when we consider the effective rate, which represents the proportionof a person’s total income paid in income tax. Figs. 1 and 3 show that the effectiverate broadly rises to reach a peak in the mid-1970s, before declining slowly.However, these figures also show that the experience of the effective tax rate hasvaried significantly between income groups, and between single persons and marriedmen with dependent children.

Our statistical tests reveal a significant relationship between changes in theeffective tax rate and electoral outcomes (Table 2); governments have been morelikely to lose elections when the effective tax rate experienced by electors hasincreased over the period since the previous election. A further decomposition of thisresult (Table 4) indicates that it is consistent with respect to the effective tax rate fora married person with two dependent children across all income groups used in thisanalysis. For the single person tax rate, however, the relationship holds only forhigher rate taxpayers. This relationship between the effective tax rate and electoraloutcomes is unrelated to other standard economic indicators – of unemployment,inflation, and growth of income – none of which display a significant relationshipwith electoral outcomes over the period 1951–2001.

This result must not be taken to imply that single people earning up to 150% ofaverage earnings have been indifferent to changes in the effective tax rate, or thatelection outcomes have been driven by the voting behaviour of married persons withtwo dependent children, or higher-income single person electors. The ANOVA

407P. Johnson et al. / Electoral Studies 24 (2005) 393–408

results report a probabilistic statistical relationship, and should not be seen asa model of underlying behaviour; to explore such behaviour would require analysisof detailed individual-level data on the determination of electoral preferences; somedata of this sort is available in the British Election Study, but not for the long timeperiod we have examined here. Furthermore, we have chosen to examine the effectivetax rates of just two household types and five income levels; although together theyencompass a large proportion of the British electorate, other household types andincome levels might produce different results.

What our results do show is that the ‘gut feeling’ of politicians that the tax recordof a government matters should not be dismissed as an electoral myth. The smallnumber of post-war elections precludes the use of a more discriminating statisticalanalysis, but the results reported here make clear that political scientists have beentoo ready to dismiss the ‘tax issue’ as the electoral whimsy of misguided politicians.

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