The cognitive illusion occurs because most financial setbacks that people experience in life stem from events that affect them alone. They may suffer health emergencies, for instance, or problems at work. Marriages may fail, jewelry may be stolen, and floods may damage homes. In each case, the effect is to limit the ability to bid for positional goods.

Because an overwhelming majority of financial setbacks occur for such idiosyncratic reasons, it’s natural to think that the income decline from higher taxes would have similar effects. But a tax increase is different. It affects all participants in the bidding for positional goods. And because it leaves everyone with less to spend, it has essentially no effect on the outcomes of those contests. The same paintings and the same marina slips end up in the same hands as before.

Context shapes demand not just for the wealthy, but also for consumers further down the income scale. As Adam Smith observed more than two centuries ago, for example, a linen shirt is not, strictly speaking, a necessity of life. The wealthiest ancient Greeks, for example, lived satisfying lives without any linen at all. But Smith noted that in 18th-century Scotland, even the lowliest laborer couldn’t appear in public without shame unless he owned a linen shirt, “the want of which would be supposed to denote that disgraceful degree of poverty, which, it is presumed, nobody can well fall into without extreme bad conduct.”

If what people feel they need depends on what others spend, the same cognitive illusion that affects wealthy Americans’ attitudes toward taxes creates a more general bias against government. Opponents of workplace safety regulation, for example, often denounce the lower wages made necessary by its cost. For families already struggling to make ends meet, that objection resonates.

But safety regulation requires an across-the-board decline in wages, which is much less painful than one that occurs in isolation. Once absolute incomes exceed a certain threshold, lower wages are easily tolerated when they don’t entail relative disadvantage. Additional safety, bought collectively, entails a less onerous sacrifice than it does when an individual buys it for himself.

The tax and regulatory issues in the coming election are clearly important. Millions of workers will retire over the next two decades, so spending cuts alone can’t eliminate deficits. We need additional revenue, too. And as population density increases, we can’t prevent dangerous environmental spillovers without intelligent regulation.

It would be one thing if lobbying against taxes and regulation brought wealthy Americans a world more to their liking. But if their goal is to buy a home with a more spectacular view, for example, they will be disappointed. There are only so many such homes to go around, and they’ll be bought by the very same people as before, since everyone will be bidding more.

So when the anti-tax wealthy make campaign contributions, they are buying only the deeper potholes and dirtier air that inevitably result when tax revenue is low.