Politics and Public Opinion, Polls

Why are people comfortable with their income taxes?

Image Credit: Shutterstock

Image Credit: Shutterstock

This is the first of three posts on AEI’s updated Public Opinion Study on taxes. Read the second post here.

Over the past few years, as our updated AEI Public Opinion Study on taxes shows, more and more Americans say they’re comfortable with the amount they pay in federal income taxes. Slightly more told Gallup pollsters this year that the amount they pay in income taxes is “about right” as opposed to “too high.” It’s completely odd. Hating your taxes seems like an American tradition, like Super Bowl Sunday or doing everything possible to drive around toll stations. What accounts for the change in attitudes?

Income tax you pay is too highThe development is all the more puzzling because most people feel their finances are somewhat precarious now. The recession hasn’t really ended in most people’s minds, and they are anxious. Anxiety can even be seen in other questions about taxes. Sixty-nine percent told Gallup that the amount they pay in taxes is hurting their finances. Sixty-one percent told Fox News that their family’s paycheck is smaller this year because more taxes are being taken out.

Inferring that if people are insecure about their finances, they should also be unsatisfied with their federal income taxes is probably an overly simplistic way of looking at it. Economic anxiety may be the chief culprit behind the “about right” response for different reasons.

1: It’s all relative. People don’t compartmentalize different aspects of their financial situation. Priorities shift and right now, other financial concerns crowd out federal income taxes. Unease over unemployment and rising prices are particularly high. In the 2012 presidential exit poll, 38% checked the box indicating that unemployment was the biggest economic problem facing them. Thirty-seven checked rising prices. Only 14% checked taxes. As people’s concerns lie elsewhere, their income tax burden may feel comparatively manageable.

2: Other taxes. Other forms of taxation, like payroll and local property, may feel more burdensome now than the federal income tax. Recent polling data that compares these types of taxation is hard to come by though, which makes this point mostly speculative. The last time Gallup compared different taxes was five years ago. The data we do have suggest the federal income tax generally doesn’t rank above other kinds of taxes as the most unfair or the tax that has increased the most. As fewer people are paying any federal income taxes, the shift in attitudes could be following changing tax patterns as well.

3: Taxes in the future. Uncertainty about future tax increases may also motivate the “about right” response. People expect their taxes to go up. Fifty-nine percent told Fox News that it’s “very likely” that income taxes will go up in 2013. Confronted with the real possibility of higher taxes, the “about right” response may be an acknowledgement (resignation?) that the tax burden could be a lot worse.

Growing satisfaction in different policy areas is normally considered a positive development. That doesn’t seem to be the case with income taxes. Instead, the growing number reporting the amount they pay is “about right” may only mean that larger problems occupy people’s attention. Hopefully in the not-too-distant future, people will be carefree enough to be angry about our income taxes again. What a glorious day that will be.

8 thoughts on “Why are people comfortable with their income taxes?

  1. The development is all the more puzzling because most people feel their finances are somewhat precarious now. The recession hasn’t really ended in most people’s minds, and they are anxious.

    The recession hasn’t really ended Andrew. Most people know that. The reason why many are not that upset about taxes is because many get more from the government than they pay in taxes. If you are old and on SS why would you complain? If you are poor and live off transfers while you pay nothing in taxes why would you complain?

    Growing satisfaction in different policy areas is normally considered a positive development. That doesn’t seem to be the case with income taxes. Instead, the growing number reporting the amount they pay is “about right” may only mean that larger problems occupy people’s attention. Hopefully in the not-too-distant future, people will be carefree enough to be angry about our income taxes again. What a glorious day that will be.

    LOL…When the USD collapses as the Fed steps up its QE to infinity efforts they will complain more about taxes. But it certainly will not be glorious.

    • Vengel, in regards to the recession, I was referring to the official economic recession that NBER calculates. The recession officially ended in June 2009 according to them. Of course, Americans don’t think that way. They view the recession as the overall period of econoimic hardship. The fact that so much time between has elapsed between the end of the official recession and now, where Americans continue to tell pollsters that the country is in a recession, speas volumes to me.

      • Vengel, in regards to the recession, I was referring to the official economic recession that NBER calculates. The recession officially ended in June 2009 according to them.

        They use BLS data that is so massaged and modified that it is meaningless. Having a small group of people get very rich by speculating in currencies and a lot of government spending on weapons systems, wars, a war on drugs, etc., may imply that GDP is going up but that does not mean that there is a real recovery in the economy. During real recoveries the number of people leaving the workforce does not explode and neither do the number of people on food stamps. If the reported numbers reflected what was going on in the real world NBER would not have reported that the recession was over.

        Of course, Americans don’t think that way. They view the recession as the overall period of econoimic hardship. The fact that so much time between has elapsed between the end of the official recession and now, where Americans continue to tell pollsters that the country is in a recession, speaks volumes to me.

        It does to me too. It tells me that the public is a better judge of what is happening on Main Street than NBER.

  2. The question is about federal income taxes specifically, not taxes generally. I might be missing something, but my quick analysis is that the amount of people who think that they are paying about the right amount of federal income tax is pretty close to the amount of people that are are paying zero, close to zero, or negative federal income taxes.

    • Greg, I think you’re right that fewer people paying income taxes would account for the increase in the “about right” number. Yet, what really puzzled me is the relatively high number who report that federal income taxes are imposing financial hardship on their families. The two data points suggest to me that fewer paying federal income taxes doesn’t fully explain the data. But I appreciate the thoughts.

  3. Very interesting to know that people are actually comfortable with the amount they pay in federal income taxes because they have bigger problems to worry about.

  4. “”LOL…When the USD collapses as the Fed steps up its QE to infinity efforts they will complain more about taxes. But it certainly will not be glorious.”"

    QE is just a technique to combat the zero-lower bound problem, it doesn’t affect USD’s relative market pricing.

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