The Perceived Impact of Tax and Regulatory Changes

People believe that shared events, events that impact everyone to the same degree, will nonetheless impact them more than others. Across four studies we examined whether this impacts people's reactions to proposed changes to tax and regulatory policies. We found that participants thought that tax (Study 1a and 1b) and regulatory (Study 2) changes would have more of an impact on their own lives than on the lives of people in their same financial situation. We then examined whether these findings are the product of a broad focalism bias or its narrower relative, egocentrism. Because we observed the bias both when participants were asked about their own financial situation or that of someone else, the former appears to be the better explanation (Study 3). We discuss the implications of this bias for people's willingness to embrace policy proposals designed to advance the common good.