She speaks like a Mexican because she has lived in that country for more than a decade, but she is not.
He was born in Denmark, grew up in different European countries, and did his Ph.D. at the University of Cambridge, UK. Alice Krozer knows the intersection between Latin America and Europe and has specialized in studies on inequality, elites and social perceptions.
It is precisely these topics that the research carried out together with Raymundo Campos-Vazquez, Aurora Ramírez-Álvarez, Rodolfo de la Torre and Roberto-Velez-Grajales deals with. The focus was on the perceptions of Mexicans.
“People want less inequality, but they don’t want to pay more taxes,” says the researcher at the Colegio de México. “It’s a kind of paradox between what you would like and what you are willing to sacrifice .”
It is true that in Mexico there is a negative image of taxes because many people believe that in the end the benefits do not reach the most vulnerable sectors, he points out.
But when they were asked about a hypothetical scenario in relation to how much they would be willing to contribute to end poverty and inequality – not to mention the tax issue – the answer was not very generous, especially in the richest sectors of the population.
You did a study of how Mexicans perceive inequality and social mobility in their country. What were the main conclusions of the investigation?
One of the conclusions is that people do know that there is a lot of inequality in Mexico. That perception is quite close to the measurements. And the same about poverty.
But people have a very different idea of what wealth is and what social mobility is. In wealth, they overestimate how many rich people really exist.
As for social mobility, people believe that it is much higher. They think that 30% of those born poor will become rich. And that is not like that. Out of 100 people born into poverty, only two make it to the highest income sector. It is a huge discrepancy between perception and reality.
The other important conclusion is that people do not associate the tax system with redistribution. People want less inequality, but they don’t want to pay more taxes. They don’t make a connection between the two. They do not think that taxes can be a redistributive measure.
The study indicates that Mexicans would be willing to contribute 10% of their income to reduce inequality and poverty. How does it vary according to the social stratum to which the question was asked?
There is a question that says: if I gave you an income of a thousand pesos and told you that with a magic stick I am going to make poverty and inequality disappear, how much would you be willing to give of those thousand pesos?
In Mexico, the poorest said they would be willing to contribute 15%, while the wealthiest people said they would give 7.5% on average. This means that those with higher incomes are less concerned about the problem.
Why are they less concerned about the problem?
It may be for personal reasons in the sense that they are not aware of the suffering caused by inequality, although it may also have to do with ethical ideals. But that specific question was not part of the study.
When they asked about willingness to contribute in this hypothetical scenario, they did not ask how much they were willing to pay in taxes …
No, they were separate questions.
C hen specifically asked to pay more taxes to reduce inequality and poverty … detected that some do not want to pay more taxes because they think they are efficient, ie because resources are not actually reach the most vulnerable?
High-income people used to say, I pay a lot of taxes, I’m not going to pay more. We asked how much you think you pay in income taxes now.
And all, regardless of socioeconomic level, answered 40%. That is well above what is paid today in Mexico.
And how much is paid in taxes in Mexico?
It depends but on average 22%. But everyone thinks they pay 40%. Then we ask them how much they would like to pay. And all answered about 22%, which is what is paid in reality. That is the irony.
Then we ask them what their ideal tax rate would be for rich people, for those with a middle income, and for poor people. Most said that their ideal rate for the poor would be about 14%, for the middle sectors 22%.
But for the rich, people with less income said they should pay more, while richer people said they should pay less.
How much do the richest pay?
Nominally they should pay about 35%, but in reality they only pay 18%
There are several factors including evasion, circumvention, exemptions …
How do you define a rich person in Mexico?
There is no category of rich as such. Commonly in economic studies, for example, the 1% measurement is used. In Mexico, the 1% with the highest income earn about 150,000 pesos per month.
And at the other extreme?
In Mexico, about half of the population lives in poverty. And if we add to that the population with vulnerabilities, we reach 80%. That is to say, there is very little margin to have an average income.
And at that level of poverty, the effect of the pandemic is not yet included.
In general, can we say that Mexicans would like to have less inequality, but are not willing to pay more taxes?
Yes. What the study shows is that people do not make the connection between inequality and paying taxes. In Mexico, there is a very negative image of taxes.
But that will have some real support, given the levels of corruption that have historically existed in the country …
This bad image is not accidental. For many decades, paying taxes has been very frowned upon. That has to do with ideological issues and with practical issues.
People wonder how much paying taxes helps the poorest, or how much taxes help if there is no good free public health or educational system.
In the study, you say that paying taxes is the best tool to reduce inequality. But if people are suspicious and do not see the social benefits of paying taxes, perhaps that negative idea is justified. What is your opinion?
Surely an important part of the taxes goes to places where they should not go, be it inefficiency, corruption, or whatever. But I don’t think that’s why you have to have a negative idea of taxes.
There is also the view that the state should not intervene in redistribution issues. There is a conservative vision of having a small state.
In Scandinavian countries, for example, you pay three or four times more than you pay in taxes here. They also complain about taxes, but on a very different level. They say I don’t want to pay 48% of my income, I prefer to pay 40% or 45%.
But in Mexico and in Latin America in general, the benefits of the tax system are not so clear …
It is that among the richest people, there are many who do not agree that health and education should be for everyone. Beyond not seeing the benefits, there is an idea about the role of the State.
You measured inequality using the Gini Index and discovered that Mexicans would like to have an inequality like Finland’s …
We show them scenarios about inequality and ask them what the ideal situation would be. Mexico has a Gini of 0.5. They replied that a Gini of 0.3 or 0.20 would be ideal, as in Finland. Obviously, we did not ask them about the Gini, but we showed them some graphs so that they could choose the ideal system.
About half of those surveyed said they would like to have an inequality equivalent to Finland, ie 0.2. That tells us that people do not want to live in such an unequal country. People do want a more equal society. And the Scandinavian countries are usually like a utopia.
Obviously, things do not work perfectly in those countries. I have grown up in Denmark and I know that things are not ideal there either. Although what Mexicans want, what they aspire to, is to have a more just society, with greater opportunities.
But without paying more taxes …
It is that Mexicans dream of being like Finland, but without paying taxes like the Finns.
The idea of wanting to be like a Scandinavian country, in terms of having less inequality, ends there.
Being a Scandinavian country means paying close to half of your income in taxes in the highest brackets.
The minimum income tax rate, for example in Denmark, starts at 36%. And that is equivalent to the maximum rate in Mexico.
After this research, what feeling do you have beyond academics?
I was left with many more questions. So we got more funding and now we are about to go out on the field to continue investigating these issues.
And I was wondering how you can convince people that it is a good idea to pay more taxes, or at least have a more progressive tax system to reduce inequality.
It is urgent to do something about this issue. With the pandemic, more income is needed now more than ever. And since Mexico is one of the countries with the greatest inequality in the world and with the least social mobility, it is important to do something.