“Don’t tax you, don’t tax me, tax that man behind the tree,” the legendary Democratic senator from Louisiana, Senator Russell B. Long, once quipped. Taxes might be key to funding government, but most of us would rather not pay. In fact most adhere to the “ability-to-pay” principle upon which the federal income tax, adopted in 1913, was built: those with more should pay more. If you ask 1000 randomly selected Americans about their tax preferences, as I have done, more than two-thirds say they would like the rich to pay more. When asked what system is the fairest, one in which tax rates increase as income rises, stay the same, or decrease with income, most choose the first option, a progressive tax system. From the perspective of most taxpayers, the man behind the tree—the one who should be taxed more—is rich.
Most people also consider themselves pretty informed, clear-eyed thinkers. Especially when it comes to issues like taxes, measured in the straightforward metric of dollars and cents, most people think they understand the stakes and have preferences that align with their interests. Classic models in economics certainly assume individuals are self-interested. A famous one, called the Meltzer-Richards model, asserts that as average income in society exceeds median income, meaning that income is skewed toward the top end of the spectrum, the typical person in the middle will desire higher taxes on the rich to close the gap through redistributive spending.
So far, whether in their abstract preferences for the rich to pay more through progressive taxation, or in economists’ models, Americans’ tax attitudes correspond to their self-interest: lower taxes for themselves, higher taxes on the rich. But when we start asking people about particular taxes, this clear-eyed thinking goes off the rails. Survey respondents who want the rich to pay more and who embrace progressive tax systems should have the most positive attitudes about taxes that hit high income people harder, such as the estate tax, federal income tax, and (in most states) the state income tax. And they should disapprove the most of regressive taxes that take a bigger bite out of their own incomes, like the sales tax.
And yet, when it comes to individual taxes, Americans’ attitudes are the opposite. What taxes do they most want decreased? Estate and income taxes. Which taxes are they most sanguine about? Regressive sales taxes.
Why is there is such a disconnect between abstract and specific preferences? How could so many lower- and middle-income Americans hold tax attitudes that go against their self-interest?
One issue is complexity. In the 100-plus years since the adoption of the federal income tax, richer Americans have fought to get their effective rates of taxation reduced, greatly complicating the tax code in the process. First, they’ve been successful in getting top tax rates reduced. Some readers might remember the 70 percent top tax rate of the 1970s. Gone. Now the top rate is 37 percent. Some readers might remember there were 25 tax brackets back then, so that as one’s income rose, the tax on the next dollar earned notched up rapidly. Gone. Now there are seven brackets, and a CEO earning $10 million faces the same top rate as his cardiologist earning $650,000. Second, richer Americans have reduced their taxes by securing tax breaks, the scores of credits, deductions, and preferential rates that reduce how much one pays. Some of these breaks benefit middle class Americans, like the fact that employer health insurance premiums are not taxed. But the vast majority of such tax breaks flow to upper income groups. The tax break system is also huge: the money the government loses through these breaks nearly equals the amount it collects from the individual income tax. And all of these provisions greatly increase the complexity of the federal tax system. By , federal tax statutes alone are longer than the entire Harry Potter series. Including regulations quadruples the total and adding case law makes it nine times longer. Such complexity makes it very difficult for ordinary Americans to see clearly their stakes in the system.
That elected politicians choose not to speak clearly about who pays and who benefits also undermines public understanding. The federal income tax garners the most attention, and has been the subject of waves of policymaking for decades. Correspondingly, that tax is the most salient to the public and the source of many misperceptions. With political leaders continually discussing the need to cut federal income taxes, nearly three-quarters of my survey respondents say middle-income people pay more in federal income taxes now than in 1980, and two-thirds say people like them pay more now. In reality, average tax rates have fallen for all income groups over the last four decades. Similarly, many non-rich Americans would like to see the estate tax reduced, believing that it constitutes “double taxation,” since surely wealth accrues from saved income that was already taxed. But a great deal of the wealth possessed by the most privileged has accrued not through the accumulation of unspent income but rather through inheritance or “unearned” gains in the value of assets. These gains can escape taxation altogether unless subject to the estate tax. Yet these processes are outside the experience of many ordinary taxpayers, leaving them vulnerable to elite rhetoric about the pressing need to eliminate double taxation. Survey respondents tend to dislike the taxes that political elites talk the most about, not the ones that cost them the most.
The designs of taxes—how they are collected and used—also affect people’s tax attitudes. The bottom sixty percent of households pay more in sales taxes each year than in federal income tax. The bottom eighty percent pay more in payroll taxes than income taxes. Yet most are more likely to dislike the federal income tax and want to see it decreased. How can we explain these contradictions? The relative popularity of the payroll tax is understandable—it funds Social Security and Medicare, two of the most cherished government programs. But the sales tax? Its proceeds go into the same general revenues pool as the despised income tax, so benefits can’t be the driving factor. Instead, the way in which the tax is collected matters. Most people have no idea how much they pay in sales tax each year, because it is taken in small increments with each purchase. My survey respondents also say they like the sales tax because it feels controllable: “don’t wanna pay the tax, don’t buy the item,” said one. In contrast, one cannot pay less federal income tax unless one works less. Attitudes toward the gas tax show the importance of controllability as well. We might expect gas taxes to be popular like sales taxes: they are taken a bit at a time with every fill-up, and one doesn’t know how much one pays in a year. But people despise the gas tax. Why? Lack of controllability. My survey respondents say that they have to drive, and so paying tax on something they must do to get to work, take children to school, and so on, feels cruel and uncontrollable. Gas taxes “kinda get you where you live. You have to have transportation,” said one respondent.
Tax attitudes are driven less by material stakes—how much each tax costs ordinary individuals and households—and more by other factors: the volume and tenor of elite discourse, the visibility of costs, the connection to desirable benefits, and controllability. Complexity makes it easy to mislead ordinary people about their stakes, to the benefit of the wealthy. Turns out it’s not so easy to tax the (rich) man behind the tree.
Andrea Louise Campbell is the Arthur and Ruth Sloan Professor of Political Science at the Massachusetts Institute of Technology. She is the author of How Policies Make Citizens: Senior Activism and the American Welfare State and Trapped in America’s Safety Net: One Family’s Struggle (91ĚŇÉ«).