Americans seem reluctant to believe this.
Half of Americans told Gallup in April that their taxes were “too high,” an increase from the average level of 45 percent over the prior three years. And the share saying this was greatest among middle-income respondents, those making between $40,000 to $99,000 per year.
This perception contrasts starkly with what Americans — including the middle class — are actually paying this year.
Americans are forking over very little, according to calculations from Congress’s nonpartisan Joint Committee on Taxation. Households earning less than $75,000, on average, will pay nothing in federal income taxes; those earning between $75,000 and $100,000 will pay an average income tax rate of just 1.8 percent.
Of course, income taxes aren’t the only taxes people pay. But the committee finds that even including federal payroll and excise taxes, lower- and middle-income families are projected to pay a smaller share of their income today than they did a few years ago. For example, those making $75,000 to $100,000 are projected to pay an average tax rate of 11.9 percent this year; in 2016, the same income group paid 16.1 percent.
Tax burdens are lower today thanks to a series of cuts passed under both President Biden and President Donald Trump. These include direct payments that Americans received, known variously as “stimulus payments or “economic impact payments.” These were advance payments on a tax credit — i.e., tax cuts — even if they weren’t always marketed as such. Other changes, such as the expanded child tax credit, have reduced tax liabilities, too.
This is not the first time Americans’ perceptions of their tax burden have seemed at odds with policy changes.
The 2017 tax overhaul, for example, reserved the biggest bounty for the wealthy but cut taxes for most other Americans, too. Yet when asked whether they got a tax cut, most people said no. Surveys found that people likewise didn’t notice or had already forgotten tax cuts they’d received under presidents Barack Obama and George W. Bush.
Americans also frequently overestimate how much they’ve paid into the system — believing for instance they’ve fully prepaid the cost of their Medicare benefits, when Americans typically receive far more in benefits than they paid in payroll taxes.
To be fair, the convoluted U.S. tax system can make it difficult to grasp what you pay and how much your bill changes from year to year.
Weekly take-home pay, withholding and end-of-year tax payments can fluctuate for many reasons, including changes in wages, hours and health premiums. It’s hard to disentangle these factors from tax policy changes. Lots of people incorrectly conflate the size of their tax refund with their tax bill, too.
Even if you carefully scrutinize your 1040, it’s difficult to discern which policy changes might affect you.
For example, lots of Americans believe their taxes went up after the Trump tax cuts because they live in high-tax states, and the law newly capped the state-and-local-tax (SALT) deduction. In reality, taxes still fell on net for all but a sliver of Americans, because of other offsetting changes such as the doubling of the standard deduction. Even in New York, taxes rose on only 8 percent of households.
This kind of rhetoric matters when people assess their tax burden. So do perceptions of whether the government is working in their favor.
“When you ask Americans whether their taxes are too high, the answers are typically about politics more than economics,” said Vanessa Williamson, a senior fellow at the Tax Policy Center and author of “Read My Lips: Why Americans Are Proud to Pay Taxes.” She notes that the recent increase in the share of Americans who say their taxes are too high is driven by Republicans — who usually think taxes are too high but especially when Democrats are in charge.
Democratic politicians are not exactly helping perceptions. They’ve argued that the middle class and poor deserve much more government services — but that only the very wealthy and corporations should foot the bill for the expansion. (“I will not add a tax burden — an additional tax burden to the middle class in this country,” Biden pledged. “They’re already paying enough.”)
Given rising inequality and plutocratic tax-code changes, corporations and the wealthy are a good place to start raising more revenue as the economy recovers. But if Biden wants to permanently transform the role of government, eventually we’ll need broader-based taxes, just as other countries with more robust welfare states already have.
It would be nice if Democrats began making that case openly, rather than conceding to the Republican myth that everyone’s already overtaxed.