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Conflicting public attitudes on redistribution

Sociologist David Weakliem wrote recently:

A Quinnipiac poll from April 2019:

“Do you support or oppose raising the tax rate to 70% on an individual’s income that is over $10 million dollars?” 36% support, 59% oppose

A CNN poll from February 2019:

“Would you favor or oppose raising the personal income tax rate for those with very high incomes, so that income of ten million dollars or more would be taxed at a rate of 70%?” 41% favor, 52% oppose

A CBS News Poll from September 2009:

“If the Obama Administration proposed a tax of 50 percent or higher on the incomes of the very wealthiest millionaires, would you support it, or not?” 51% yes, 45% no

Even people who are towards the bottom of the economic ladder aren’t very enthusiastic. The Quinnipiac results were not broken down by income, but only 31% of whites without a college degree, 51% of blacks, and 47% of Hispanics supported a 70% tax.

This relates to an issue I [Weakliem] have written about before. It’s sometimes said that most people are to the left on economic issues. This suggests that the only way conservatives can win elections is by diverting their attention to “culture war” issues, or race, or some other area where the right has an advantage. But the idea that the public is to the left on economic issues is wrong—in addition to the lack of support for high tax rates, there’s not much support for inheritance taxes. This doesn’t mean that the public is conservative on economic issues—for example, most people are in favor of maintaining or increasing Social Security benefits, increasing the minimum wage, and increasing taxes on corporations. Public opinion on economic issues don’t really fit on a left/right scale . . .

A few days later, he followed up:

I [Weakliem] realize I left something out of my last post, which said that Americans were not in favor of high taxes on the rich. The Paul Krugman column that I mentioned said “A . . . large majority has consistently said that upper-income Americans pay too little, not too much, in taxes.” He is right–since 1992, the Gallup poll as asked if upper income people are “are paying their FAIR share in federal taxes, paying too MUCH or paying too LITTLE?” In the latest survey (2019), 9% said too much, 27% fair share, and 62% said too little. The share saying too little has never gone below 55%. But as my post pointed out, when you ask how much high-income people should pay, most people don’t suggest high rates. In addition to the questions I mentioned last time, here’s a Gallup/USA Today poll from 2011: “Now thinking about the wealthiest one percent of Americans, what percentage of their income do you think they should pay to the federal government in income taxes each year?” Among those who gave an answer (28% didn’t), the mean was about 24%, and only 10% said 40% or more.

Weakliem asks:

How do you reconcile these results?

His answer:

Most people seem to think that people with high incomes are taxed at lower rates than most middle-income people. A 2003 survey asked “In the United States, which group do you think pays the highest percentage of their income in total federal taxes: high-income people, middle-income people, or lower-income people, or don’t you know enough to say?” 25% said high-income people, 51% said middle-income people, and 11% said low income people (13% said they didn’t know). Even among people with college degrees and people earning $75,000 or more (the highest income class distinguished in the survey), most people thought that middle income people paid the highest percentage. Other surveys show that most people know that in principle marginal tax rates increase with income, so presumably they think that high-income people are able to get out of taxes by finding loopholes.

So when people say that high income people should pay more, they are just saying that they want them to pay at the same rate that middle-class people do, or maybe a slightly higher rate. In reality, they already do pay at a somewhat higher rate. Most people haven’t thought about the issue all that much, so you can’t make precise statements about public opinion. But in a rough sense, Americans are getting about as much redistribution as we want.

I dunno, I think it’s more complicated than that. I feel that much of the contradictions in public opinion arise from conflicting implications of “fairness.” On one hand, it seems fair if all are taxed at an equal rate; on the other hand, it seems fair that rich people pay more. Another complication is that taxes don’t exist in a vacuum; they’re the flip side of spending. On one hand, people like most government programs: survey respondents typically want to spend less on the military and on foreign aid but to maintain or increase spending on just about everything else. On the other hand, tax money goes to the government, and people mostly don’t trust the government.

So it’s tricky. Attitudes don’t exist in isolation.

In any case, Weakliem should have his own NYT column (along with Jay Livingston). Keep Krugman and Brooks; just reduce their frequencies and alternate them with Weakliem and Livingston.

77 Comments

  1. Dzhaughn says:

    “Weakliem should have his own NYT column”

    Bari Weiss will get right on that. Wait, what’s that you said?

  2. One thing that needs to be included in these discussions is the *actual amount they pay* vs what some tax table says they should pay. The tax system is *SO* complicated precisely because it enables massive gaming of the system for upper income people… Right now the top tax bracket is what 35% or more? And yet Warren Buffet has repeatedly said that the amount of taxes he actually pays is less as a fraction of his income than his secretary…

    IMHO if you *lowered* the tax rate to a flat tax of 30% and a UBI of 10% of GDP/capita with no other rules involved, it would be effectively a massive tax hike on the rich.

    • David Stauffer says:

      I think that’s not the best representation of Buffett’s tax situation. The main issue is that he’s comparing capital gains to regular income tax rates. Some argue capital gains shouldn’t be taxed at all since the money has already been taxed once as regular income (“double taxation”, I don’t really see that since money is taxed in nearly every transaction at every level of the system so why are capital gains in particular double?). But regardless, Buffett is not using a loophole unless you consider any deviation from a flat tax rate on any kind of income a loophole.

      If he paid himself more than $100k/year for managing Berkshire Hathaway then his regular income would enter the higher tax rates and he would start to pay a higher fraction than his secretary. So this is more of a weird result from someone rich paying themselves a small salary than some “exploitation” of the tax system.

      • Do you really believe that he doesn’t use all the various ways to prevent his money from being taxed? Including classifying various things as business assets, writing down depreciation, taking tax credits for farm related business expenses, converting money to charitable donations that go to charities he controls so he can spend that money on things he wants to see happen… moving money into overseas subsidiaries, …

        And if not Buffet because he has some special moral aversion than just about everyone else in his net worth category.

        • David Stauffer says:

          The question is not “do the richest people take advantage of tax loopholes” because of course they do, and why not, but “do these loopholes put their tax rates lower than those of the middle class”? Or maybe just “how low can the rich get their tax rates”? I’m sure this has been studied intensively but I’m not well-versed in the issue. Nonetheless, here is the first thing I could find (from the CBO): https://www.cbo.gov/sites/default/files/49440-Land-Figure2.png

          Seems to suggest the top 1% pay a higher effective rate than the top quintile, than the middle quintiles, than the bottom quintile.

      • Zhou Fang says:

        The fundamental principle of progressive taxation is based on (a) opposing the excess concentration of wealth, (b) making use of concavity in utility functions to maximise public good. None of those justifications imply there is some sort of specialness to wage compensation that means it should be the focus of the policy. The philosophical justifications operate entirely on the overall rate of change of wealth, not on any specific subcomponent.

        The nature of tax laws are such that there is a specific component of (rate of change of wealth) that is more common and accessible amongst the more wealthy that is taxed at a lower rate, such that the intended effect of progressive taxation is entirely countered. How is that not a loophole?

        • Carlos Ungil says:

          Change of wealth != Income

          • Zhou Fang says:

            Seems like pedantry to me.

            • Carlos Ungil says:

              Someone who made 40k and was asked to pay 10k more in taxes because his house had appreciated by 45k would probably find the distinction quite relevant.

            • jim says:

              Zhou:

              It’s hardly “pendantry” to distinguish “wealth” from income. Wealth is the value of assets a person has accumulated throughout their lives – their *savings*; income is the monthly paycheck.

              There are lots of people who are relatively wealthy because they work hard and make sacrifices. There are lots of people who have large paychecks but are relatively poor in assets because they don’t. So if you want to stop people from saving and investing, tax wealth.

              I like your example about if the price of housing falls the homeowner is happy because s/he pays less tax. Note that the government also gets less tax. If you’re taxing wealth – the value of people’s investment assets – and the stock market tanks, where’s the government going to get the money to provide those “Progressive” social services that were funded by the now-collapsed stock market?

              Also, if people are paying taxes on wealth, then debt would have to be subtracted from assets. All those “Progressive” programs funded by property taxes all over the country would disappear pretty fast when people start subtracting their property’s debt from its market value.

              People can argue about tax rates and loopholes etc, but the distinction between wealth and income is certainly real and significant.

              • Zhou Fang says:

                The whole point of contracyclical tax policy is that the government spends more during times where tax intake falls. This is not a bug, it’s a feature.

                People who aren’t wealthy also work hard and make sacrifices.

    • gec says:

      > *actual amount they pay* vs what some tax table says they should pay

      As Martha would say, +1.

  3. Daniel Weissman says:

    I feel like discussions of these statistics always omit what to me is the most striking point: a substantial fraction of people are in favor of big tax increases on the rich even when presented in isolation, even before you mention what positive things the money might be used for.

    • Anoneuoid says:

      To me its that the discussion always omits any discussion at all of the federal government becoming more efficient with the tax dollars it already gets. Never a single mention of this, when as a former employee I know its gotta be at least 50% wasted. I would personally say at ~75% of the money that went to me was wasted based on my personal productivity when working there vs elsewhere.

      Imagine all the positive programs that could be funded with a $2 trillion/year increase in tax revenues. But this possibility is never even brought up.

      • jim says:

        “omits any discussion at all of the federal government becoming more efficient”

        Yes, businesses merge and slash middle management to increase revenue and cut costs. Governments just keep asking for more money.

        • Anoneuoid says:

          I don’t think making the comparison to businesses is necessary. I’m certain there are tens of millions of people getting paid to spend most of their time walking up and down hallways all day or similar instead of getting their job done. Even that is assuming the job is actually productive to begin with. Eg, I’d say my specific research project probably wasn’t worth funding to begin with but apparently no one had ever taken a critical look at the literature before.

          Instead of paying for that maybe use the money for something useful? Why is there never any discussion about this?

          • Anoneuoid says:

            Sorry, tens of thousands. Not millions.

          • jim says:

            “I’m certain there are tens of millions of people getting paid to spend most of their time walking up and down hallways all day or similar instead of getting their job done.”

            That’s what mergers do in business: they give the company an excuse to consolidate business units and get rid of useless projects and employees and refocus on the fundamentals of whatever the business is.

            • Anoneuoid says:

              Ok, but why bring it up? The point is to end the waste not see who is more wasteful.

              • jim says:

                The point is that giving money to the government is *always* wasteful because there is no effective mechanism to eliminate waste in government, as you have made so clear.

              • Anoneuoid says:

                The point is that giving money to the government is *always* wasteful because there is no effective mechanism to eliminate waste in government, as you have made so clear.

                Sure, but I mean that relatively minor 10% decrease in federal government waste would be equally effective as raising $200 billion/year in extra taxes. That is equivalent to raising taxes on the 1% by 30%: https://taxfoundation.org/summary-of-the-latest-federal-income-tax-data-2020-update/

                Comparing to waste by businesses doesn’t address this.

            • David J. Littleboy says:

              That’s what mergers are _supposed_ to do. In real life, if you look at what happens to businesses Mitt Romney’s company purchased, the assets are sold, the workers fired. Not all, just most, of the time. And mergers in the medical services industry are about fighting insurance companies, not efficiency.

              I’m getting more radical in my old age: you really don’t want private industry running businesses and services you consider critical. E.g. privatized schools (and even worse “for profit schools” which are largely scams), the conglomerated hospitals in Boston. Prior to covid-19, if you got sick, you really wanted to do so in England not the US. (Although Japan, prior to Covid-19, was doing a good job with private entities doing most medical services, but that was due to a level of regulation unthinkable in the US. The news here today was that a major hospital announced cancelling the summer “bonus” (this is a Japanese thing: a large part of workers’ incomes is paid in “bonusses”) of its nursing staff, and 150 nurses announced their retirement.)

              Sorry about the subject drift…

              • confused says:

                >>I’m getting more radical in my old age: you really don’t want private industry running businesses and services you consider critical.

                I don’t know: grocery stores, for example, are critical to the survival of people in modern cities, but they are all private and AFAIK no one wants to change that.

                I don’t think it’s about the *importance* of the service. but how well the market works to drive efficiency in it. IMO the inefficiency with healthcare in the US largely because insurance companies and other middlemen making pricing confusing and complex, and the generally “expert-heavy” nature of medicine, mean that the average consumer can’t usually make informed decisions.

                (IMO over-regulation by eg the FDA also drives up the costs dramatically, but while that seems fairly clear to me, it seems to be a fairly rare opinion, so perhaps I am wrong.)

              • Zhou Fang says:

                I think my semi-pedantic counterargument would be that no *one* grocery store is critical, if one goes bust people can just go to another one. If things ever got into a situation where there is in fact only one grocery store accessible, or one grocery store company, then there would be a much stronger case that this store/company should be under public ownership.

              • confused says:

                That is true, but in cities at least there are many doctors’ offices available as well. (Sure, not in very rural communities – but these often have only one grocery store as well; or none, and people have to drive 30+ miles to get more than general store/convenience store items.)

                So not sure that provides a difference between food and medicine.

              • jim says:

                “That’s what mergers are _supposed_ to do”

                You’re referring to a buyout, not a merger. But I think you’re also missing the fundamental issue with buyouts: the assets and employees are being shifted to more productive / higher value uses.

                You focus on the profit that the buy out firm makes. But other people are buying the assets at the given price for a reason: because they can utilize those assets more effectively than the current owners. And chances are good that they’ll also be hiring people.

                The individual employees may or may not themselves go on to make more money. But whether they make more money or not, they’ll likely go on to *be more productive* – that is, produce more output per unit of cost. They may go on to lower paying jobs, while the new jobs created with the assets are higher paying jobs. Or it may be the other way around or some mix.

                All that’s happening is the assets are being redistributed in a way that makes them more effective under the current economic conditions. If you want to blame someone for that, blame the original owners and managers. They’re the ones who are selling.

      • Ben says:

        > omits any discussion at all of the federal government becoming more efficient with the tax dollars it already gets

        Well I don’t think that’s totally accurate. From the post:

        > On one hand, people like most government programs: survey respondents typically want to spend less on the military and on foreign aid but to maintain or increase spending on just about everything else.

        So military cuts are there as a non-fringe opinion.

        Also I thought a lot of the single-payer healthcare arguments were made from an efficiency basis.

    • jim says:

      “a substantial fraction”

      Recently I read about a university class designed to teach students to detect untruths in the media. It had lots of pointers like “does the writer have expertise in the area of discussion? If not, this is a red flag”.

      But I’d say a substantial fraction of the misinformation is coming *from* experts, who are hiding their untruths in statements like “a substantial fraction”, which has no meaning whatsoever other than what the current pre-eminent vocalizer insinuates into it.

      But it’s not a hopeless situation. We can infer safely that most weasel phrases are there to spruce up the message and give the illusion that the case is stronger than it is. Would dude be saying “substantial fraction” if he could legitimately say “majority”? No. So we know it’s not a majority. But it’s probably much smaller than half because even 40% or 45% sounds like a substantial fraction, so if dude could use those numbers he probably would. So, it’s a bit more risky but probably a good bet that the numbers are below 40%.

      • Guy Srinivasan says:

        With no intent to mislead, I use the term “substantial fraction” quite a bit. To my work colleagues, at least, it communicates succinctly: “not a huge amount like 50% or even 20%, but large enough that it’s worth taking into account, so depending on context probably between 0.5%-15%, but the exact number doesn’t matter so much as the two facts that it’s not the main driver of anything but it’s not small enough to neglect”.

        • jim says:

          I accept that you have no intent to mislead, but you see the difference between what you call a “substantial fraction” and what Daniel calls a “substantial fraction”. But the question is if you know how much why not just say so?

      • Daniel Weissman says:

        We don’t need to guess about the numbers I’m referring to, they’re right there in the post! 36%, 41%, and 51% for the three different questions.

        • jim says:

          I’m surprised that’s what you were referring to because you said “the rich” while the questions clearly include only people “with incomes of $10M or more” and “the very richest Americans”. Those with $10M income are a very small subset of what most people would call “the rich,” especially if you’re being specific about what you call “income”. I think most Americans – the median income in the US is something like $63K – would think of people making $250K as being “the rich” – but far from “the richest”.

          I’ll grant that was an unintentional substitution. But it shows how easy it is to misrepresent what’s actually being “said” by people who respond to polls.

          That’s aside from the difference between income and wealth, and the fact that so few Americans probably even know the difference.

    • Alexander Trevelyan says:

      Huh? I see the exact opposite striking point–a substantial fraction of people are opposed to big tax increases on the rich even though the marginal benefit to them is clearly positive (or, stated another way, there is no cost to them in increasing the tax rate but clear potential benefits). Perhaps you’re suggesting that it’s striking that they support it even before they’ve had a chance to consider all the positive things it might bring them? Maybe, but that feels like a stretch. Or, if that is the case, it’s a fairly depressing idictment of what people in general think tax money brings them at first glance.

      • Anoneuoid says:

        See my post above. I am confident the federal gov is already wasting probably $2 trillion/year. What benefits should I expect if they got more money? Then add in fasab56: now on top they are telling you the budget is falsified and theres nothing you can do about it. Or go back to the Smith–Mundt Modernization Act of 2012 that legalized propagandizing americans. How do I benefit?

        https://constitution.solari.com/fasab-statement-56-understanding-new-government-financial-accounting-loopholes/

        https://en.m.wikipedia.org/wiki/National_Defense_Authorization_Act_for_Fiscal_Year_2013

      • David J. Littleboy says:

        Agreed. There’s always been a lot of opposition to taxing the livin’ bejeesus out of the filthy rich, in my opinion mainly because way too many Americans think that they’re going to be rich and that when they become rich, they won’t like being taxed. (Also, almost no one understands progressive taxation: Under PT, everyone pays the same rate on the same income. It already is “flat rate”.)

        I was horrified at the Beatles’ “Taxman”. Apparently Lennon was too, but helped Harrison write it out of friendship. In it’s defense, 95% is probably a bit excessive as a max tax rate: 80% would be fine. But those blokes (Stones, Cream, Yardbirds) were all working class and had expectations that if they earned money, they’d get some of it. (The Dead didn’t seem to have had that problem: I think they spent so much money on roadies that there wasn’t much left over to tax.)

        Topic driftingly yours.

        • confused says:

          It also depends on how much someone trusts the federal government to spend the money on things that actually benefit you.

          City government provides easily-visible services (garbage collection, water, sewer*, police, roads, etc.); county and state government also do (police, roads, schools, etc.). The benefits provided by federal government are much less visible for many (most?) people.

          *This may explain a lot of the rural/urban political divide. These services are not provided by government in many rural areas of the US, where people have their own wells and septic tanks. The local county sheriff provides policing, sure, but that’s been true since the 19th century. The benefits of the large expansion of government in the last century are not very clear there.

          A lot of Americans just don’t trust government, especially federal government. If one is concerned about federal overreach, one is likely to think the federal government having more money is an outright *bad* thing.

  4. Ryan says:

    The people who pay the lowest percentage of their income as taxes (outside of those who don’t pay taxes or are poor) are those who can treat their income as long term capital gains… “For 2019, a single filer pays 0% on long-tern capital gains if that person’s income is $39,375 or less.” [https://www.irs.gov/pub/irs-drop/rp-18-57.pdf]

  5. I can’t resist this comment. To say that people have inconsistent attitudes about taxes is a massive understatement. See
    https://www.sas.upenn.edu/~baron/papers/ucla.pdf
    These experiments were all on a “convenience sample”, but I (like most authors, I’m sure) have no doubt that they would generalize to many real populations. Such inconsistency surely leads to lability.

    I should add that, when we were doing these studies, there were always a few subjects who behave as if (and said, in their comments that) they favored “equal distribution of income”, i.e., a 100% income tax plus a demo-grant. I came away thinking that the U.S. would have a small communist party if we had a multi-party system. (I think that Mao tried something like this and it didn’t work very well.)

    • Anon says:

      While I’m sure people do to an extent have inconsistent opinions, I’m not sure that’s the most important factor in explaining the different survey results in this post. I think it’s just hard to find out what people actually think with surveys, for a number of reasons. Response bias for example: the first survey question in this posts seems fairly neutral in its wording; the second one contains the phrase “those with very high incomes,” which arguably primes respondents to be more in favor of redistribution; and the third contains the phrase “the very wealthiest millionaires.” Not surprisingly, the percentage of respondents who favor increasing taxes increases from the first to second to third surveys. I’m sure that a motivated survey researcher could get whatever percentage they want if they word the question the right way.

  6. jim says:

    I don’t think anyone should put any stock in any of these surveys. If you asked the exact same people the same basic question in ten different ways you’d get ten different answers, especially if you ask on different days.

    • Martha (Smith) says:

      Probably a little exaggeration there, but still, the question of variability of response depending on phrasing and external influences is one we don’t consider well enough.

    • Chris S says:

      +1 on this comment. Just taking the Quinnipiac poll question at the beginning of the post, I wouldn’t be surprised if people didn’t interpret it as intended, i.e., as asking about taxing income over and above $10 million. It could easily be read as asking whether the entire income of people making greater than $10 million should be taxed at 70%, which is a very different question.

  7. David Marcus says:

    These poll questions are all poorly worded. As others have noted, there is a big difference between the tax rate and what people actually pay. Also, federal taxes are only part of what taxes people pay. You need to look at employment taxes and city/state taxes. A big problem with the poll question is that very few people understand tax brackets. So, many people are interpreting the question as 70% of total income. They are also thinking that if you start taxing rich people at 70%, one day you will tax everyone at that rate. Of course, the fact that people have trouble answering such poll questions correctly is also why we keep having awful people elected.

    • psummers says:

      I’m an Econ (macro) prof & regularly talk about tax rates, brackets, etc. with my intro students. Leaving aside the wording of the questions, the results reported totally reinforce several things I’ve observed:
      * As David said, people don’t understand tax brackets. In particular they don’t understand the difference between marginal and average tax rates. So if your income is $10 million + $1 and President Sanders ups the rate to 70% on incomes over $10 mil, you pay an extra 70 cents, not $7 million.
      * People think “taxes bad, spending good” but don’t connect the two. I read many years ago an idea that we should replace the word “taxes” with “dues”, but that idea’s disappeared to the Gamma Quadrant
      * People don’t understand percentages. So if Buffet (Warren, not Jimmy) pays $10 mil in taxes on $1 billion income, how can that possibly be LESS than his secretary who “only” pays $5k on $50,000 income?

      PS

    • Ryan says:

      +1

      The original phrasing of the questions seems like it’s designed to get a politically charged answer, for better or worse. But I also think that the use of the data is also intended as political as well… which is to say that it’s not designed to surgically unpack a set of beliefs, it’s designed to be used as fodder in arguments by people with an axe to grind.

      And I think it’s in politically motivated people’s interests to maintain the lack of clarity on the subject, so don’t expect this to change any time soon.

      • jim says:

        “…it’s designed to get a politically charged answer…designed to be used as fodder in arguments by people with an axe to grind…”

        Yeah, you get the impression they were trying to create a question that would yield a majority for increasing taxes. Once you get the positive answer, then you can misconstrue the question how you like, right? :)

        I feel like media organization polls get way too much “neutral” cred – their primary motivation is to sell their media. To the extent that it sells more eyeballs than misleading and provocative headlines, they’re willing to provide accurate data on important questions, but it’s certainly not their primary objective.

  8. Zhou Fang says:

    I think it really comes down to a confusion over what these tax terms mean. People are correct in the sense that many rich people *do* pay a lower proportion of their income in tax than they do:

    https://www.nytimes.com/interactive/2019/10/06/opinion/income-tax-rate-wealthy.html

    The intuition that the rich avoid high marginal tax rates through loopholes seem pretty accurate. One example would be things like capital gains, which is taxed at a significantly lower rate than most americans’ “income”, and make up a big chunk of rich people’s income. I imagine a lot of americans would be in favour of getting rid of this difference.

    • Zhou Fang says:

      Also, you can rebut Weakliem’s claim with this poll 2012 Gallup poll:

      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?

      60% Favour, 37% Oppose

      So I think Weakliem can be accused of being somewhat selective in his choice of the polling evidence.

    • jim says:

      Capital gains aren’t “income”.

      The biggest problem is the often intentional conflation of “wealth” and “income”.

      • Tom M says:

        Capital gains certainly are income when they are realized, which is what makes them taxable.

      • Zhou Fang says:

        > Capital gains aren’t “income”.

        Technically not but I doubt the majority of americans that want capital gains taxed at a higher rate than wages make that distinction. It’s the rate of change of wealth that people concerned about redistribution are interested in, not the economic definition.

        • jim says:

          I wonder what the average fireman would think about taxing wealth when he learns his pension will be taxed. It’s wealth, right?

          • Zhou Fang says:

            Everyone wants to pay less tax. That’s the common through-line of these anecdotes, the construction of scenarios where someone is unhappy that they are paying more tax than they would otherwise.

            But the actual point being built is *who* pays that tax, what metrics are used to calculate it. A reform that is more or less neutral in terms of total taxation, that reflects people’s ‘change of wealth’, instead of just wage income, would most likely see the average fireman, together with most other people, see a reduction in the amount of tax they pay. While adding their capital income to their wage yields obviously a larger number, it’ll be proportionately smaller an increase than the super rich, so the percentage take would reduce.

            Certainly some people would be worse off, but most people, and most people in bad situations would be better off.

    • David Stauffer says:

      From an earlier comment I made on this post: https://www.cbo.gov/sites/default/files/49440-Land-Figure2.png

      This does not appear to show anything like what your intuition says, though what counts as “before-tax income” is probably related to what you’re saying.

  9. Jonathan (another one) says:

    The clearest quantitative dyslexia is when the same people who think rich people pay too small a percentage of their income in taxes are shocked when they discover that the top 5% of earners pay 58% of all Federal Income Taxes (source https://files.taxfoundation.org/20181113134559/Summary-of-the-Latest-Federal-Income-Tax-Data-2018-Update-FF-622.pdf Table 1) Now this isn’t all Federal taxes, since Social Security taxes are highly regressive, but you can always tell when an argument is being stacked when people like Warren Buffett focus on percentages. Note that this ignores capital gains issues, but they don’t affect the central conclusion at all.

    • Lukas says:

      They also get 35% Gross Income according to your document, which is 3.5 Tr.(10^12)$. So paying 58% of the fees for still earning 1.4 Trillion USD is still very investment for the richest 5%.

      • Zhou Fang says:

        And the top 5% also have 62% of the overall net worth. So maybe if people are provided with those stats they wouldn’t be so surprised at the tax the rich pay…

      • Jonathan (another one) says:

        Indeed it is a good deal. Otherwise they would have done something other than earning the money. That’s the point. And it’s even a better deal for the bottom 50 percent, who get 1/3rd the income for 1/20th the “fees”. (Ignoring FICA, sales taxes, etc. etc. I feel it’s annoying that I have to type this every time, but if I don’t someone always brings it up.)

        • David J. Littleboy says:

          “they would have done something other than earning the money. “

          That’s the idea behind the laffer curve, and it’s basically wrong except for extreme cases: e.g. the Rolling Stones moved. Really. Rich folks do pretty much exactly the same thing, regardless of tax levels. (The Beatles just wrote a song about it.)

          “(Ignoring FICA, sales taxes, etc. etc. I feel it’s annoying that I have to type this every time, but if I don’t someone always brings it up.)”

          Why do you insist on ignoring it: as a freelance translator: my taxes are 17% (US social sec. taxes*) + 10% (local sales tax) + . If I do enough work to put me in a 20% tax bracket, say, I’m looking at 47% tax rate. And that’s before local income taxes**, property taxes, and indexed-to-income-taxes medical insurance. That’s my real, effective, actual tax rate. No rich bloke sees a real, effective, actual tax rate anywhere close to that.

          Seriously, ignoring the regressive parts of the tax system is a really easy way to make the tax system look progressive. In real life, it’s not very progressive. And a much better deal for the rich.

          *: The exact number is somewhat different. It’s slightly under 20%.
          **: Where I live there are both sales and local income taxes.

          • I’ve been going on about what I call second earner syndrome for years and years. A freelance person whose spouse earns an upper middle class income (say 75-90k) can’t really afford to work. They’d pay easily 50% of everything they earn in taxes, especially considering sales taxes, add in child care costs, and it’s easily possible to lose money by working.

  10. jonathan (of some count) says:

    i agree with what I think is one of Andrew’s points, that policy objective, meaning the why, materially determines the ordering of responses. Example: very high tax rates motivated by WWII. Where will the debt incurred during this pandemic rank?

    But ranking is complex and we dont know the arguments or how they’ll play in the light. Example: there is an argument that debt doesnt matter partly because the dollar is the or a reserve currency, partly because we can tax enough to signal that we can pay the debt. Does that mean we can incur pandemic debt AND spend trillions more? The composition of that ‘AND’ matters. So, we face new arguments about the nature of our debt, and that ‘AND’, which can range from negative (meaning we pay down pandemic debt) to the sky is the limit.

  11. Michael Nelson says:

    I’ll leave the psychological explanations to others. But the plain fact is that people who think taking 40% of a $20,000,000 is less painful than taking 40% of a $20,000 salary are factually correct. Then again, as Colbert used to say, “Reality has a well-known liberal bias.”

    • confused says:

      That could be an argument for lower taxes for the poor (at the cost of living most places in the US, $20,000 is pretty meager). It’s not necessarily an argument for higher taxes for the very-rich relative to the moderately-wealthy.

      One of the questions here is how effective wealth invested in companies (capital gains, etc.) by the very rich is at growing the economy overall, and how much the majority of Americans benefit from growth of the economy overall. Vs. how much more federal programs benefit the majority of Americans.

      If most economic growth benefits only the richest, and federal programs are relatively effective at providing benefits, higher taxes on the very-rich are an overall win.

      If economic growth brings broad-scale benefits, and federal programs are relatively ineffective, they’re an overall loss.

      If both are effective, or both are ineffective, that’s trickier…

  12. Lukas says:

    If you would ask without letting the word “tax” or “raise” fall before you say that it is to apply to the rich, would the results change?
    This stinks of bias.

  13. steven t johnson says:

    It seems to me one of the key lessons here is that innumeracy is widespread. Seventy percent sounds extortionate to the mathematically illiterate who can’t grasp that thirty percent of a million dollars a year income is an extremely comfortable income, something like five time the media…except of course many don’t even understand why the median income is such a significant figure.

    A second issue is how few people grasp the magnitude of income and wealth inequality. There are people who think middle school classroom teachers are making good money off their taxes and are effectively “rich,” an unearned privilege!

    And lastly, focusing the discussion on income rather than wealth (then income,) sharply distorts the issues right there. As usual, there is a coincidence at hand. This issue is discussed here: https://thenextrecession.wordpress.com/2020/07/15/wealth-or-income/

    Historically, when the mass of people feel they can actually do something, they erupt into a storm of talk, ending in hard left ideas and ideals spreading wide and deep.

    Figures don’t lie…but liars can figure. Applies to Weakiem?

    • Anonymous says:

      Some of the posts here are so self serving and snooty. It really reads like a bunch of posts from career government employees or people funded in some way via government like grants or as contractors. It reads like people in that situation justifying why they should get more money to look down on everyone else who doesn’t equate the government getting paid with themselves getting paid.

      • confused says:

        Heh, I am a government employee, and I’m not in favor of higher taxes. I think that in practice increased federal revenues end up mostly increasing programs that don’t actually provide much benefit, and in some cases may have negative benefit (eg, it seems possible to me that increased US military presence worldwide may actually decrease overall US security, as we end up involved in local conflicts on other continents that would not otherwise impact the US).

        The things the federal government does that are, to me, clearly net-benefit don’t seem to see much of the increases.

        Though I’m a state government employee, not federal, and my agency is primarily fee-funded rather than tax-funded. And my state has no state income tax. So that influences my perspective too.

      • steven t johnson says:

        Posts like this are so ignorant and servile. The idea that banks have the right to create money but a government should be budgeted like a teen’s allowance, so that billions of dollars can go to buy junk bonds but the problem is people getting paid with “my” money! People like that don’t seem to be able to figure out how much of their taxes are going to that person they want to look down on. If they could do the arithmetic they would find they aren’t paying for the flattery their inflated egos deserve.

        • Anoneuoid says:

          The idea that banks have the right to create money but a government

          Doesnt the government need to allow the banks that right? In principle, fractional reserve banking could be outlawed. Most people are probably not aware the bank doesn’t actually have the money they deposited. Even if you don’t know anything about it, it just sounds like a scam so I don’t think it would be that difficult to get public support for such a law.

          • steven t johnson says:

            Yes, there are people who want to go back to gold money only. And closely related are people who want to ban fractional reserve banking too.

            But I was objecting to people who somehow thought it was more moral for a private bank to create money but *not* a government, which strikes me as senseless. Nonetheless this seems to be one of the most common feelings for thinking government spending is money from your pocket. Add to that innumerate notions where the relatively minuscule amounts of your income tax somehow get translated into whatever wasteful spending you hate, like SNAP or whatever. Compound that with failure to grasp the actual sizes of, say, military spending, which is grossly minimized by most, or grossly exaggerated, as in foreign aid, you get some truly bizarre inconsistencies in preferences in surveys. So, I say again, as in my first comment, a major reason—I think—for such inconsistencies in preferences about “redistribution” lie in difficulties in grasping the numbers, starting with the notion seventy percent taxation in the million plus bracket is extortionate in the normal sense of the word.

            • Anoneuoid says:

              See my posts above, the wasteful spending I am talking about is what I experienced. They had me wasting most of my time walking around hallways, dealing with bureaucratic BS, and being slowed down by security theatre to the point I got about 1/4 as much done as elsewhere. So even if you think that project was worth funding (I would say no), etc something like 75% of what I got was still wasted.

              And if you get rid of fractional reserve banking is there a need for a central bank? Wasn’t the original purpose to be the lender of last resort?

              • steven t johnson says:

                If banks are forbidden to create money and serve only to loan out deposits left in their care, why do depositors need a bank at all? They could loan their excess funds to businessmen by themselves. The people freaking out over gold and fractional reserve banking are cranks.

                There is another aspect. There isn’t any reason for you to think private businesses aren’t wasteful. Every bankrupt business is a prima facie argument this is a perilous assumption. Only if you simply assume that private spending is moral rather than any public spending can you “justify” such nonsense. Aside from being illogical, a kind of assuming the consequent, all we really have here is worship of mammon, uncritical adoration of wealth as such. But there is no profit in discussing other people’s religion. Goodbye.

  14. Jonathan (another one) says:

    Indeed it is a good deal. Otherwise they would have done something other than earning the money. That’s the point. And it’s even a better deal for the bottom 50 percent, who get 1/3rd the income for 1/20th the “fees”. (Ignoring FICA, sales taxes, etc. etc. I feel it’s annoying that I have to type this every time, but if I don’t someone always brings it up.)

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