People think Americans hate taxes. They don’t, as I found while researching my new book; they see it as an important civic duty. What makes them angry is the idea that some people don’t pay their fair share.
And with tax reform back on the national agenda, those misperceptions matter.
Who pays taxes in the U.S.?
In a survey I conducted in 2014 of 1,000 U.S. adults, 88 percent of respondents answered “yes” to the question, “Are you a taxpayer?” But when asked what percentage of U.S. adults are taxpayers, these same respondents typically estimated 66.5 percent.
Many Americans think that they themselves are taxpayers, but think a lot of others are not. I call this mismatch the “taxpayer gap.”
Statistics can mislead. As the cliche implies, taxes are almost as unavoidable as death. Basically any interaction with the economy — working, owning property, putting gas in your car, shopping at the store — involves paying taxes. Almost every American adult engages in at least a few of these activities.
Lower-income people, who tend to pay less federally, pay a much larger percentage of their income in state and local taxes than do higher-income people.
Why is the public so confused about taxpayers?
One source may be the statistic popularized a few years ago, most prominently by GOP presidential candidate Mitt Romney, that 47 percent of tax-filing households have no net federal income tax liability. While accurate, this is often misremembered as applying to taxes in general, implying that there is a substantial “non-taxpaying class.”
In my survey research, I have found that Republicans are much more likely than Democrats to estimate the taxpaying population at around 50 percent. A third of Republicans pick an estimate between 40 and 60 percent, compared to only a fifth of Democrats. On average, Republicans thought about 62 percent of the U.S. adult population pays taxes — but even among Democratic respondents, the average estimate of the taxpaying population was 71 percent of U.S. adults.
How Americans pay taxes also leads to confusion. Filing federal taxes is a cumbersome, frustrating annual experience for many — and so that’s what they think of as “paying taxes.” But other taxes are often less obvious, bundled into prices at the store or gas pump, included in a mortgage payment, or deducted from a paycheck without much effort or attention.
Tax misperceptions matter
Margaret Levi, a political scientist at Stanford, has argued people are willing to fulfill their civic responsibilities if they think others are doing their part — a sentiment she calls “ethical reciprocity.” Economists agree that “tax morale” — their term for the shared cultural norm of taxpaying — plays an important role in tax compliance. If we doubt that others are chipping in, we are more likely to start free-riding ourselves.
Moreover, the public rhetoric about who is a “taxpayer” reinforces stereotypes about who works hard and contributes to the community.
Most Americans imagine that recent immigrants get more in government benefits than they pay in; the reality is very different. Undocumented immigrants, in particular, are often presumed to not pay taxes — but are paying billions into Social Security and Medicare, even though they are not eligible to get anything back.
There is also a class bias at work in the popular definition of a “taxpayer.” Low-income people are less likely to describe themselves as taxpayers — even if they work and own a home. Interviews with some of my survey respondents confirmed that their idea of a taxpayer was a well-off working person — someone making “a decent salary,” as one New Jersey woman put it.
While most Americans believe the wealthy should be paying more in taxes, a small but increasing percentage of Americans believe that low-income people are not paying enough taxes, either. It’s ironic that low-income taxpayers are invisible. If there’s a class of persons who aren’t paying much in taxes, it is corporate “persons,” not real human people working, shopping and living in the U.S.
Being a taxpayer makes you a member in one of the most inclusive of clubs. This Tax Day, spare a thought for all the taxes you pay, and all the taxpayers who are chipping in with you.
Vanessa Williamson is a fellow in governance studies at the Brookings Institution and author of the new book Read My Lips: Why Americans Are Proud to Pay Taxes.