Tax Fairness: What Do People Think About It?

April 15th, 2014 at 10:16 am

I’ve been thinking about tax fairness in recent days, and was thus interested to peruse the Gallup results of the question.  Nothing too surprising—those who pay more in federal taxes think they’re too high; almost nobody thinks their tax bill is too low.  Stop the presses!

But departing from the data a bit, there are two factors that I suspect have an impact on our general perceptions of tax fairness.  For one, there’s our feelings about what we’re getting for our tax dollar.  In this regard, dysfunctional or ineffective government, from the shutdown to the health reform rollout, likely chips away at fairness perceptions.  My readers know my take on this: those policy makers and their funders who would shrink government by slashing spending and choking off revenues benefit greatly from this dynamic.  They have a strong incentive to pursue dysfunctionality.

Second, pretax wage stagnation for the many in a context of sharply rising incomes for the few could also contribute to a sense of unfairness in terms of taxation, even in a progressive system (and especially in one where wealthy corporations pay low effective rates).

Below, I’ve plotted the real median wage against Gallup’s share of those who say the federal tax system is fair (I’ve lagged the fairness result by one year, so your feelings about tax fairness this year are influenced by your last year’s real wage).

Now, do not take this too seriously.  There are lots of lines that move like this and it would take a lot more work to see if this correlation means anything.  But it’s suggestive.




Source: Gallup, EPI (median wages)

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7 comments in reply to "Tax Fairness: What Do People Think About It?"

  1. doverby says:

    There has always been a disconnect between what people think they should be taxed and what services that they think the government should provide them. For the most part, people are never going to think that they pay too little in taxes. People are also always going to think that the government spends too much money. Once you get into specifics, though, people don’t want to cut spending from any program. This Pew Research poll always comes to mind:

    I don’t think this in any way undermines your point, though. I think it’s very likely that median wage can have an affect on people’s perceptions on tax fairness. It would be interesting to look at the relationship between these two things in more detail.

  2. Robert Buttons says:

    Thus far, we have seen dysfunctional govt benefiting not the budget cutters, but the advocates of big govt. Here’s one example:

    1. Govt “helps” students by subsidizing college education
    2. Subsidies create a dysfunctional marketplace, pushing up costs.
    3. Students call on even MORE intrusive govt to solve the problem of high tuition.
    4. Return to step 1

    • Jonas says:

      So there are no other drivers of rising tuition, huh? No demand-side factors? Good to know.

      • Robert Buttons says:

        Not sure what you are referring to. Govt is “goosing” the demand side factors with grants and subsidized loans.

        • doverby says:

          Grants and loans are only a small part of the picture. Tuition still rises in years that loan limits are not increased. There are two larger reasons:

          -One reason that tuition has been rising is that state and federal funds to colleges have been decreasing for the last few decades. That’s why for the first time a couple of years ago, universities obtained more revenue from students than they did from the states. They are effectively shifting the costs from the government to the students.

          -Another reason is that universities (mostly research-oriented universities) have been spending more and more money, mostly on salaries and research.

  3. Larry Signor says:

    Check out this article from Bloomberg: Tax Havens Leave U.S. Filers $1,259 Tab Each, Report Says

    Want to talk about a disconnect? This not bad policy, this is no policy.