IMF Study Uncovers How Citizens Misjudge Debt and Expect Taxes to Rise, Not Cuts

The IMF working paper shows that people across 13 countries often underestimate public debt, expect tax hikes more than spending cuts, and carry lasting skepticism shaped by past austerity. It highlights how misperceptions, political beliefs, and historical experiences deeply influence fiscal expectations and trust in government.

Research produced by the International Monetary Fund (IMF) in collaboration with YouGov, supported by academic expertise, investigates how people in both advanced and emerging economies perceive government debt, public spending, and taxation, and how these perceptions shape their expectations about future fiscal policy. Based on a large-scale survey conducted in April and May 2024, which covered more than 27,000 respondents across thirteen countries, the study provides rare insight into the intersection of knowledge, belief, and experience in the fiscal domain. Advanced economies like the United States, the United Kingdom, France, Germany, Italy, Japan, Canada, and Australia were surveyed alongside emerging economies such as Argentina, Brazil, Hungary, and Poland. The samples were designed to be nationally representative by age, gender, and region, and in some countries extended to socioeconomic categories such as class, race, and education. Respondents were asked about their understanding of debt, spending, and taxation, their perceptions of whether levels were high or low, and their expectations of fiscal adjustments over the coming five years. A randomized information treatment, in which some respondents were told their country’s actual debt levels, allowed the researchers to examine how factual data altered expectations.

Misperceptions of Debt and Their Consequences

The results reveal a striking gap between reality and perception. In countries with very high debt ratios, well above 100 percent of GDP, such as Japan, Italy, the United States, the United Kingdom, France, and Canada, large portions of the public underestimated actual levels. Knowledge varied across demographics: older people, asset holders, and those receiving pensions were more accurate, while younger and less financially engaged citizens tended to underestimate the size of public debt. These knowledge gaps are not just academic; they shape the expectations people hold about the future. When asked to look five years ahead, respondents in Brazil and Italy were more prone to underestimate how debt would evolve, while in Germany and the Netherlands, there was broader confidence that debt would remain stable or decline. In Argentina, interestingly, about half of the respondents expected debt to fall within five years, perhaps reflecting the deep scars of past crises and a hope for eventual stabilization. The survey makes clear that subjective impressions matter: those who already believe debt is “very high” tend to expect that it will only get worse, regardless of official forecasts.

Expectations of Taxes and Spending Cuts

Across all thirteen countries, a consistent pattern emerges: most people anticipate higher taxes rather than reductions in government spending as the primary tool of fiscal adjustment. Between half and four-fifths of respondents expected tax increases in the near future, while only about one-third foresaw cuts to spending. The timing of these expectations varied sharply. Italians and Argentinians expected cuts within two years, a reflection of fiscal stress, while Brazilians and Japanese citizens saw little likelihood of such measures in the short run. Gender, class, and financial position also played a role. Women were more likely to believe tax hikes were imminent and less likely to expect spending cuts, while owners of financial assets were more inclined to see cuts on the horizon. Political orientation mattered as well: those who felt they were “net payers” into the system were more skeptical of government spending, while those who saw themselves as beneficiaries often believed debt could be managed without major retrenchment.

The Long Shadow of Fiscal Consolidations

Perhaps the most intriguing finding of the paper is the enduring legacy of past fiscal consolidations on present-day attitudes. By linking survey results with historical data on episodes of austerity, the study shows that people who have lived through repeated adjustments remain more pessimistic about governments’ ability to stabilize debt. These individuals are more likely to expect debt to rise, more convinced that high debt harms future generations, and less trusting of state institutions. The scars are deepest where austerity took the form of spending cuts rather than tax increases, suggesting that visible reductions in services leave a more lasting mark than higher levies. Moreover, many of those who experienced harsh consolidations expect inflation to eventually serve as a tool for debt reduction, reflecting a lingering suspicion that governments may resort to indirect rather than direct adjustment. This collective memory affects not only expectations of fiscal tools but also broader trust in the political process.

Information, Beliefs, and Policy Challenges

The randomized information experiment highlighted the difficulty of shifting public opinion with facts alone. When confronted with the actual debt-to-GDP ratio, some respondents revised their views toward greater support for fiscal adjustment, but others became even more skeptical. Pre-existing beliefs and partisan leanings filtered the reception of information, creating heterogeneous responses. The implication is that simply providing accurate statistics is insufficient to build consensus around policy; credibility and trust are critical. The paper emphasizes that people’s fiscal expectations directly affect their economic behavior. Whether families decide to save, consume, or work more is partly shaped by what they believe about future taxes, inflation, and government stability. If misconceptions are widespread, aggregate demand may be influenced in ways policymakers cannot fully anticipate.

A Global Story of Knowledge, Trust, and Legacy

The IMF’s working paper ultimately portrays a world where fiscal beliefs are riddled with misperceptions, where historical experiences of austerity continue to shape political attitudes, and where the trustworthiness of governments matters as much as fiscal arithmetic. In macroeconomic terms, beliefs about debt and deficits are not neutral, they feed into real behavior, shaping consumption, savings, and investment. For governments seeking to stabilize debt, the challenge is not only technical but political and psychological. Communicating fiscal realities requires more than official forecasts: it requires consistent credibility and sensitivity to the lived history of austerity. The paper thus offers not just an academic exercise in surveying attitudes, but a powerful reminder that fiscal policy operates in a deeply human context of memory, trust, and contested interpretation.