Tax Protestors Ignorant on Taxes
Conservative apostate Bruce Bartlett takes to Forbes to argue that the Tea Party movement, largely motivated by opposition to high taxes and out of control federal spending, is actually not particularly informed on these issues.
Tea Partyers were asked how much the federal government gets in taxes as a percentage of the gross domestic product. According to Congressional Budget Office data, acceptable answers would be 6.4%, which is the percentage for federal income taxes; 12.7%, which would be for both income taxes and Social Security payroll taxes; or 14.8%, which would represent all federal taxes as a share of GDP in 2009.
Not everyone follows these numbers closely, and Tea Partyers may have been thinking of figures from a few years ago, before the recession when taxes were higher. According to the CBO, the highest figure for all federal taxes since 1970 came in the year 2000, when they reached 20.6% of GDP. As we know, after that George W. Bush and Republicans in Congress cut federal taxes; they fell to 18.5% of GDP in 2007, before the recession hit, and 17.5% in 2008.
Tuesday’s Tea Party crowd, however, thought that federal taxes were almost three times as high as they actually are. The average response was 42% of GDP and the median 40%. The highest figure recorded in all of American history was half those figures: 20.9% at the peak of World War II in 1944.
This is actually a ridiculously unfair question. Nobody thinks of taxes in terms of GDP; it’s a meaningless number to most of us.
To follow up, Tea Partyers were asked how much they think a typical family making $50,000 per year pays in federal income taxes. The average response was $12,710, the median $10,000. In percentage terms this means a tax burden of between 20% and 25% of income.
Of course, it’s hard to know what any particular individual or family pays in taxes, but according to IRS tax tables, a single person with $50,000 in taxable income last year would owe $8,694 in federal income taxes, and a married couple filing jointly would owe $6,669.
But these numbers are high because to have a taxable income of $50,000, one’s gross income would be higher by at least the personal exemption, which is $3,650, and the standard deduction, which is $5,700 for single people and $11,400 for married couples. Owning a home or having children would reduce one’s tax burden further.
According to calculations by the Joint Committee on Taxation, a congressional committee, tax filers with adjusted gross incomes between $40,000 and $50,000 have an average federal income tax burden of just 1.7%. Those with adjusted gross incomes between $50,000 and $75,000 have an average burden of 4.2%.
This is a more fair question but only by comparison. At $50,000 income, the marginal tax rate is 25%. That makes the average guess of $12,710 almost exactly right. Bartlett is right, of course, that few people actually pay the full marginal rate because of various deductions and credits. But, again, people tend to think of these things based on the published rates and the amount withheld from their paychecks. And, of course, they also think of FICA, Medicare, and other federal withholdings as part of their federal tax burden.
Tea Partyers also seem to have a very distorted view of the direction of federal taxes. They were asked whether they are higher, lower or the same as when Barack Obama was inaugurated last year. More than two-thirds thought that taxes are higher today, and only 4% thought they were lower; the rest said they are the same.
As noted earlier, federal taxes are very considerably lower by every measure since Obama became president. And given the economic circumstances, it’s hard to imagine that a tax increase would have been enacted last year. In fact, 40% of Obama’s stimulus package involved tax cuts. These include the Making Work Pay Credit, which reduces federal taxes for all taxpayers with incomes below $75,000 by between $400 and $800.
The problem with this is that people are likely confused on this matter because they quite reasonably believe that the effect of Obama policy proposals, most notably health care reform and the massive debt incurred for the stimulus package, will mean higher taxes. (Bartlett acknowledges this later in the piece, calling it “Ricardian Equivalence.”) People tend to conflate things that the president proposes with actual reality.
Probably the simplest motivation the Tea Partyers have is the one that Howard Beale (actor Peter Finch) gave in the 1976 movie Network. “I’m mad as hell, and I’m not gonna take it any more!” he said to cheering crowds. In other words, tea parties just represent unfocused anger at current economic conditions. Those who feel this way have latched on to the Tea Party movement not because they really believe that their taxes are too high, that taxes are rising or that taxes are at the root of our economic problem. Rather, they have joined because it’s the only game in town; the only organized force with at least the potential of bringing about change that might make things better.
In this sense, the tea parties are simply the latest manifestation of populism, which has arisen periodically throughout American history. In the 19th century populist anger was based in rural America and directed at the banks and railroads as well as government. Populists thought that free coinage of silver, an inflationary policy that would have raised prices for farm commodities, was the solution to their problems in the same way that today’s Tea Party crowd thinks that the Federal Reserve, bailouts to big businesses and a looming government takeover of the health industry are at the root of our economic malaise. Tax cuts are like free silver–a one-size-fits-all policy response.
Here, Bartlett is almost surely right. Large swaths of the public at large, and most of the Tea Partiers, are scared about their economic future and distrustful of government. Some of their fears are rational; others, not so much.
But it’s unfair to single out the Tea Party movement for ridicule. Those of us who follow public policy very closely have a better idea of economic statistics than average citizens but even most of us only have ballpark estimates of some of the figures that were surveyed here. It’s just unfair to expect otherwise.
To the extent that large numbers of citizens are angry at their government because they’re grossly uninformed, the blame lies with their leaders, not them. It’s the job of the president and elected representatives to persuade the citizens that their proposed policies are beneficial. If they’re failing to do that, they’re not doing their jobs.