A study by three researchers from the Colegio de México (Colmex) has revealed that Mexicans would pay more taxes only if the richest were charged 60% of Income Tax (ISR).
In the Preferred Tax Rates Depend on the Rates Paid by the Rich study, 3,179 people were surveyed and presented with five hypothetical cases, where the richest people would pay rates of 20 to 60% of ISR.
In this sense, if the rich paid 60% of this tax, people would be willing to pay 14.2% of their income in taxes, on average. While if those with greater resources paid 30%, people would allocate 11.8 percent.
“What we are finding is that when the rich have a high rate, we as a society are willing to pay more taxes. We take the rich as a reference group. This is the result, but only when it is a very high rate, 60%,” Raymundo Campos Vázquez, a researcher at the Colmex Center for Economic Studies, told El Economista.
However, the researcher mentioned, if people with higher incomes are taxed at a rate of 40 or 50%, it is not possible to distinguish, in statistical terms, that people want to pay more in taxes.
“Raising revenue through taxes is always politically complicated, but we are showing that it could be possible if the tax rate for the rich is much higher than that for other groups,” said Campos Velázquez.
The Colmex professor also explained that the pressures on spending in the country are very high because pensions continue to grow. In addition to the fact that there is a very large regional lag and poverty continues to be very high.
High socioeconomic level and trust in the government
The research points out that the increase in the willingness to pay more taxes is mainly driven by people with a high socioeconomic status and by those with a higher degree of trust in the government.
The Colmex researchers argue that “instead of avoiding the necessary progressive tax reforms, the key to getting out of the tax conundrum is to understand what motivates people to support tax increases.”
Urgent tax reform
Given the rejection of this government to carry out a far-reaching tax reform, the interviewee commented that more resources are required to be able to face social problems.
“Pension spending continues to grow and there are very large regional lags that we have to address, so this implies that the resources have to come from somewhere. One possibility is that more resources would be possible, but only if you increase the ISR rate for the rich, would people be willing to pay more.”
The document points out that low tax collection prevents effective public policies, and the lack of effective policies means that people do not trust the State and, therefore, do not want to increase tax collection.
It should be remembered that within the countries of the Organization for Economic Cooperation and Development (OECD) Mexico ranks last in tax collection as a percentage of Gross Domestic Product (GDP).
The latest data shows that Mexico’s tax revenue represented 16.7% of GDP in 2021. While the average for all OECD countries was 34.1% of Product.
