Further thoughts on taxes

Andrew Gelman had a post discussing my posts on public opinion about tax rates.  His post and the comments on it raised some interesting points.  Rather than reply to them one by one, I'll discuss what I think are the main themes.  But before I do that, some self-promotion:  I have a new book with the imaginative title of Public Opinion, which discusses some of these issues in more depth and is reasonably priced ($22.95 in paperback).   

1.   Do people even have opinions about this?  Most people don't have "positions on the issues" the way that a politician does--they've never had to take a definite stand or cast a vote on proposed legislation.  With tax rates, there's the additional issue that math is involved:  many people don't grasp the difference between marginal and average tax rates, and even if they do, the  questions may be open to different interpretations.  Finally, as Andrew pointed out, taxes can't be separated from spending.  If ordinary people had to serve as legislators, they would probably find that their proposed tax rates wouldn't raise enough revenue to pay for the programs that they want.   So they might reluctantly decide to raise taxes, but whose taxes, and by how much?    As a result, there's a good deal of fuzziness--it would be foolish to make an exact statement about the tax rate that the public favors.  However, if you look at a range of questions, I think it's clear that most people do not favor high taxes on people with high incomes--that they think that the rate on the top 1% should be something like 25%, not 50% or 75%.  One comment pointed to a poll which asked "Would you favor or oppose Congress passing a new law that would require households earning $1 million a year or more to pay a minimum of 30% of their income in taxes?" and found 60% in favor, suggesting that this counted against my argument.  I don't think it does--30% is only a little higher than the numbers I cited, and it didn't ask how many should pay substantially more than the minimum.   So you could say that, on the average, people think that people think the tax rate on high incomes should be about 30%, or 25%-30%, but it's still not 50% or 75%. 

Another way to put it is that people favor only a moderate degree of progressivity.  One survey (from 2012) which I didn't mention in my post asked "what maximum percentage do you think...individuals and families with incomes" in different ranges "should pay each year in income taxes?"  The averages:

50-75,000          17%
250-1,000,000   27%
1,000,000+        31%

The actual federal income tax rates paid in those income groups according to the staff of the Joint Committee on Taxation (in 2015):  4%, 15%, and 27%.  So taken literally, income tax rates are lower and the tax system is more progressive than people want.  Of course, I wouldn't take it literally--I don't think that most people distinguish clearly between different types of taxes, so when they answer the question on "income taxes" they're thinking more of taxes in general.  But if you take "combined income, social insurance, business, and excise" (table A-6) the average rates are 15%, 27%, and 33%.   If you consider state and local taxes, tax rates are somewhat higher and less progressive, but overall, what people say they want is not that different from the way things are.

In an article published in 2013 I said " There is little support for direct redistribution from the rich to middle-income people, or even for making the rich bear the primary burden of financing general government expenses (Kluegel and Smith 1986; Hochschild 1981). Most people favor some 'safety net' for the poor, but seem to believe that the cost of this aid should be spread widely . . . rather than placed primarily on the rich (Miller 1992)."  I think that the evidence that's emerged since then continues to support this summary.

 2.  Are opinions consistent?  I argued that you could reconcile people's opinions about desired tax rates and changes in those rates by considering beliefs about what people actually paid.  You could wonder whether there was any point in trying to reconcile them.  Some observers, notably Larry Bartels, argue that many opinions are just logically inconsistent.  That's not necessarily because people lack intelligence, but because they don't have an incentive to think deeply about political issues (also, someone who's answering a survey doesn't usually didn't know that it was coming, or what it would be about--it's like a answering a pop quiz in a course that you didn't even know you were taking).  This is a matter of judgment, so I'll just say that I'm inclined to try to find some consistency. 

2.  Could opinions change?  Most of the time, things just roll along, but sometimes people get engaged and focused on some issue.  Although these times of high engagement are rare, they are important, because they can lead to lasting change (the weeks since the death of George Floyd may turn out to be an example). But I can't think of a case where opinions about general economic inequality have rapidly shifted to the left (maybe the 1930s in the United States, but that was the infancy of surveys, so it's not possible to be sure).  In the years after the 2008-9 recession, there was a turn to the right in the United States, with the rise of the Tea Party and big gains for the Republicans in the 2010 elections; in Europe, overall there didn't seem to be much change in public opinion.  So while you can't rule out the possibility that things might change suddenly, I wouldn't bet on it.


[Data from the Roper Center for Public Opinion Research]