I have no idea how to answer this question, partly because I don’t believe in public opinion polls. But for those who do, here are the results of asking the public what tax rate the rich should pay:
21 percent of respondents recommend a rate below 20 percent;
17 percent recommend a rate of 20 percent;
23 percent recommend a 25 percent rate;
14 percent recommend a 30 percent rate;
13 percent recommend a 35 percent rate;
4 percent recommend a 40 percent rate;
no one recommends a 45 percent rate.
It’s unclear to me whether this refers to just federal income taxes (which currently has a top rate of roughly 41%), or all income taxes (where the top rate ranges from roughly 41% to roughly 54%), or whether the share of corporate income taxes absorbed by the rich should also be included.
I’d add that these rates may be maximum average rates (as few voters understand the term ‘marginal’), and thus do not necessarily imply that voters believe the rich are currently paying too much. Nonetheless, these results suggest that something like a 28% marginal tax rate on income over $200,000, with no loopholes, might be acceptable to most voters. In that sort of tax system the average income tax rate paid by the rich would be slightly below 28%. But again, that’s just if you trust polls. I don’t.
BTW, the same poll found that low-income people are the most likely to support low tax rates for the rich.
The Hill Poll, conducted by Pulse Opinion Research of 1,000 likely voters, also found broad support for lower rates across income groups. The group most supportive of lowering tax rates on the wealthy below current rates made between $20,000 and $40,000 a year; 81 percent supported tax rates of 30 percent or lower.
Either lower middle class people tend to be supply-siders or they expect to win the lottery. Or perhaps they are simply young people who hope to make much more money in the future.
HT: Brandon Berg
READER COMMENTS
Benjamin Cole
Jan 10 2019 at 10:57pm
I sure wish we could stop niggling over income (and payroll) taxes and figure out a way to migrate to national property, pollution, sales, Pigou and import taxes.
Given “adjusted gross income,” and offshoring of income, and a cash economy, what is even “income” anymore?
Income taxes have become hopelessly complex (an understatement) and increasingly uncollectable. That latter characteristic may be why there is little discussion of moving away from income taxes.
Funny side note: Import tariffs are largely taxes on consumption. Income and payroll taxes are taxes on productive behavior.
Puts import tariffs in a different light. Blow out that candle!
Mark Z
Jan 11 2019 at 3:20am
“Either lower middle class people tend to be supply-siders or they expect to win the lottery. Or perhaps they are simply young people who hope to make much more money in the future.”
They may also be the ones who have the least knowledge of what the tax rates are for the wealthy. In fact, this is even consistent with the stereotype of young people being the most progressive. Even if the average young person wants to raise taxes on the rich by more than the average older person does, if the average young person underestimates the current tax rate by even more than the average older person does, he still ends up technically favoring a lower tax rate on the rich than the average older person.
Now, an interesting thing to do in one of these studies: split each group randomly into two cohorts, and for one cohort, give them full information about current tax rates on the survey before asking how they’d like to change them.
robc
Jan 11 2019 at 10:12am
I think the big takeaway is the “with no loopholes” bit.
I think people overestimate how many loopholes and deductions the rich really get, so its possible they think that a 30% tax with deductions would be a tax increase.
Or they just may be ignorant of the current system entirely.
John Hare
Jan 11 2019 at 1:10pm
I hear a lot of people recommending rich people write something off on their taxes as if it was a dollar for dollar saving instead of the tax rate saved. They honestly think that the write off costs nothing to the rich guy. Probably part of why they are not.
robc
Jan 11 2019 at 2:28pm
I have had that discussion with people before.
It is depressing.
Floccina
Jan 11 2019 at 5:18pm
I’ve heard even worse, people will say he needed the deduction, like if he made a charitable gift he would reduce his taxes by more than the gift. At that point I explain taxes to them a bit and they seem to accept what I say with surprise.
john hare
Jan 11 2019 at 5:51pm
My experience is worse. I try to explain and am told that I don’t know what I am talking about well over half the time. It is remarkably difficult to get through to some that a dollar loss only results in thirty to forty cents in tax savings.
MarkW
Jan 15 2019 at 4:39pm
“They honestly think that the write off costs nothing to the rich guy.”
Seinfeld nailed that one:
https://www.youtube.com/watch?v=rCZRqH7sRyA
Billy Kaubashine
Jan 11 2019 at 10:31am
The bigger problem is the 45% or so who pay NO income tax. They vote for politicians who promise them “free stuff” with absolutely no concern that it might cost them anything.
We fought a revolution against taxation without representation. We need another against representation without taxation.
Micke
Jan 11 2019 at 10:36am
Most people are just terrible at percentages. A simpler question to ask that would avoid this is the following:
A person makes $1,000,000 per year. He gets a raise of $1,000/month. Out of those $1,000, how much do you think he should pay in taxes, and how much should he keep?
Yes, we should ask both how much to pay in taxes and how much to keep, so that we can eliminate every answer where this doesn’t add up to the full $1,000.
RPLong
Jan 11 2019 at 2:40pm
I agree, this is a much better way to ask the question. I think that’s what I’m going to ask the next time I have this conversation among friends. Thanks for that.
I don’t anticipate anyone’s really having a clear answer to that, though. People don’t really have an opinion on what number specific tax rates ought to be. Instead, they think “the rich” ought to pay “more” and the poor ought to pay “less.” I don’t object to their opinions, per se, but it’s worth noting once again that “politics isn’t about policy.” It’s just a proxy discussion for people’s opinions of rich and poor.
Scott Sumner
Jan 11 2019 at 11:37am
Ben, You said:
“Funny side note: Import tariffs are largely taxes on consumption. Income and payroll taxes are taxes on productive behavior.”
I’d strongly encourage you to read a textbook on public finance so that you stop making these basic errors. Payroll taxes are consumption taxes.
David S
Jan 14 2019 at 4:37pm
“Payroll taxes are consumption taxes.”
I’m not sure I follow this either. If one has a payroll tax, then all investments are taxed equal to consumption. If one has a consumption tax, then investments are not taxed and consumption is. If one has an import tariff, then (to first order, ignoring that the tax is passed on to the manufacturers and then to investors) investments are not directly taxed but all (foreign) consumption is.
So isn’t a payroll tax at least a lesser consumption tax? Is consumption being used here in a technical sense that I missed somehow?
In media, consumption tax seems to be used interchangeably with VAT. Did things just get mislabeled again?
Scott Sumner
Jan 15 2019 at 12:12pm
David, A VAT, a consumption tax, and a payroll tax are identical in the long run. There may be a difference at the point of implementation, in terms of how they tax existing capital.
Actually, in a sense all taxes are consumption taxes, as they reduce a person’s consumption. But in economics the term consumption tax’ refers to a tax that taxes current and future consumption at equal rates. That’s true of all taxes mentioned above. Am income tax taxes future consumption at a higher rate than current consumption.
IVV
Jan 15 2019 at 3:55pm
The preferred tax rate is whatever it takes so that I and people I identify with don’t have to pay much tax, but people who lord their excess worth over me have to fork it over to pay for government projects that benefit me.
That doesn’t have a number. Just arbitrary power.
V L Elliott
Feb 4 2019 at 3:27pm
Interesting and informative discussion. What about sales (not VAT) taxes on items that consumers can choose to buy or not? No taxes on bread but taxes on croissants as an example. So long as the consumer has the tax information available they are able to choose whether or not to buy the croissant and, in effect, to pay the taxes. This would be a factor in how the consuming public — pretty much all of the public? — views the legitimacy of the system. Not generally part of fiscal analysis maybe but certainly relevant to the economic study of instability and internal war. It would be consistent with the secession ideas of Gordon Tullock as well as those of James Buchanan and Roger Faith, Jack Hirshleifer’s on conflict and Herschel Grossman’s on insurrection/insurgency. Secession and internal wars are limits in the developed world and extreme limits in most cases but that is not the case in many poorer countries. In political systems where the citizenry/consumers vote, secession may not be chosen if regimes and/or their leaders can be peacefully removed from office. Hirshleifer specifically addressed voting and so policy as well as regime change. I don’t remember anything from Mancur Olson’s work that keeps voting out of the reasoning. So the limit may not be as distant from the general discussion as might be believed and the perception of legitimacy of system and order by the consuming and tax paying public might be worth some thought.
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