How we feel about our taxes

It would be interesting to see these data broken out by income quintile, tax bracket or some other such grouping.

Note the interesting reversal in late 2001.

I wonder if that's an artifact of 9/11?

The 3% who think their taxes are too low fascinate me. I wonder if they give the government extra when they pay their taxes. I bet not. Warren Buffet and Bill Gates don't.

I can't wait to see this graph again when they are all on 6 month waiting lists to see their physician about that lump they found and their taxes are hiked up to pay for all that free health care they have a right to. There aren't enough people making >$1MM who are dumb enough not to shelter the vast majority of that income or to just work less to avoid the 10% tax hike (bush cuts + surcharge) to pay for for their promised all-you-can-eat medical buffet.

I second Niles's suggestion about breaking out by quintile.

I don't put too much stock in opinion polls, but I wouldn't be surprised at all if a lot of the "too low" category is your Warren Buffett types - exactly the kind of people that we're talking about raising taxes for. That would also go a long way in explaining why there's so few of them!

I'm not 100% behind this surtax on the rich. I support in a strong progressive tax structure, but radical changes to the service provided by government should be taken seriously and supported by everyone. We won't take arbitrating between different reform options seriously if we simply soak the rich to get things done.

So aside from specific taxes that have come up lately, I bet the distribution of these responses across the income distribution bears fairly close resemblance to some dominant tax reform proposals.

"Note the interesting reversal in late 2001.

I wonder if that's an artifact of 9/11?"

Probably has more to do with actual changes in the tax structure. People get their taxes cut, and they're less likely to say it's too high.

Daniel Kuehn: "I support in a strong progressive tax structure"

What a surprise!

This reminds me of the typical polls about congressmen...the polls show you're comfortable/okay with your own representative, but you think it's other people's representatives who are causing all the problems.

Or perhaps the typical unemployment polls...you typically feel your own job is pretty safe, but you're worried about your neighbors' and friends' jobs.

I wonder, is there a formal name for this effect? If not in economics, perhaps in psychology?

Daniel - what is the moral justification for progressive tax structure?

I think the "my taxes are just right" idiots are fascinating. How on earth?!!

I'm not 100% behind this surtax on the rich.

You are never 100% BEHIND anything, whether it is tax, government, truth, lies, humor, health etc. so what % are you behind this surtax on the RICH?

John Dewey and Crusader -

Ouch... that was mangled syntax on my part :)

As for ethics, I'm not an ethicist and as long as policy decisions aren't explicitly unethical I'm not sure you can point to one revenue policy and say it's "more ethical" than another. But like I said... I'm no ethicist so maybe that's complete bunk.

When we think generally about taxes, though, I think the ethical instinct is to treat people equally. As economists, we know that people have different preferences so we should really think more in terms of utility when we think about optimizing social welfare. As economists we also recognize that we optimize by equating margins, not absolute values of anything.

With that economic/ethical foundation I'd say that the goal should be equalizing the marginal disutility of taxation across the tax base. Given the diminishing returns to money that we know exists, that implies a progressive tax structure.

I think this kind of thinking isn't just sound economics, it's also inherently how people think about fairness. Marx gave "from each according to his abilities to each according to his needs" a really bad reputation, but think about how families operate privately. With in a community, some form of this logic (obviously less extreme and all encompassing than Marx's formulation) is the natural understanding of "fairness" when it comes to common sacrifices for common goals.

I'm just sketching that out - you'd have to ask an ethicist for a more formal answer.

I'm also hugely flexible. I don't like flat taxes, but I'm very attracted to progressive consumption taxes too. I think it would be good to consider moving in that direction. I'm not dogmatic about it, but I do think a fair tax structure is going to have to be structured progressively to some extent.

Bill observes that 45% of households pay no federal income taxes. Is it reasonable to assume that none of these folks were among the 48% (2009) who responded that their federal income taxes were too high? If so, then this 48% were among the remaining 55% who pay some federal income taxes. So, 87% (48/55) of those who pay federal income taxes feel their taxes are too high.

RE: "You are never 100% BEHIND anything, whether it is tax, government, truth, lies, humor, health etc. so what % are you behind this surtax on the RICH?"

Haha - touche. Shall I be decisive for once? 0% behind explicitly tying a surtax to health reform, 100% behind making the tax structure at least marginally more progressive at some time in the near future - ideally once recovery starts to pick up, though.

but I wouldn't be surprised at all if a lot of the "too low" category is your Warren Buffett types - exactly the kind of people that we're talking about raising taxes for.

No, that's not what you're talking about. The schmuck in New York City making $350K per year is in the same tax bracket as Buffet. The guy making $1MM per year is also not in the Billionaire's bracket. But you're looking to raise taxes on all of them. And who's this "we"? Are you finally giving up the charade and throwing yourself in with the socialists or did that just accidentally slip out from behind your mask?

Methinks -

"We" being the people who are taking part in the conversation. It's not socialist. "We" are talking about a surtax on the rich. Some of us are opposed to it, and some of us are supportive of it, but "we" are talking about it. And I suppose some of us also aren't talking about it :) Please don't read too much into a little two letter word.

I suppose I'd be OK raising taxes for someone making $350K a year, but I don't recall advocating that explicitly and I definitely don't recall advocating putting them in the same bracket as Buffett. Please don't assume you know what I do or don't want to do. You have a long track record of misunderstanding that, so it's best not to assume.

So, Danny, it seems that all your claims of being misunderstood were really hollow after all. We all saw right through your back-peddling and sidestepping to your molten socialist core.

You are a would-be social engineer who will decide what other people's utility curve is and where their optimal return to money and impose it on them by confiscating anything above what YOU consider an adequate amount. You also believe that I somehow care or should care as much about you as I care about my family because you imagine in your overactive fantasy life that we have some common goal. I assure you that you mean nothing not only to me but to anyone on this blog either. And let me assure you in no uncertain terms that I don't have a single common goal with a socialist like you.

What I want to know is if you actually swallow your own bullshit or if you just peddle out to others in the hope they will. You sure have a butt-load of it.

Methinks -

You know what - I probably could guess what your ideal tax policy is or what Don's is or what other people's are on here, but I don't feel the need to go around assuming it, calling it bullshit, and writing a three paragraph post denouncing it. Crusader asked me a question and I responded to it. If this is how you insist on reacting to that exchange, you don't need to involve yourself in everything. You can leave it to me and Crusader.

I don't presume to know what people's utility curves look like or what specific tax rates should be. I never laid claim to that knowledge or authority. But I'm fairly comfortable saying that everybody's utility curve is concave, and if that's true than a tax policy that equalizes marginal disutility across society has to be somewhat progressive. The ONLY thing I have to assume for that to be true is that you have a diminishing marginal utility for money. That's all I'm saying, and I'm suggesting this is how a lot of people naturally think about things - even if they don't do the calculus. I can't fathom why that's so offensive to you. The argument is over a century old. It's a very straightforward argument. It merits engagement and objective criticism, not insults.

Dan,

Who the heck are you to decide how much anyone gets to keep and who should pay more and who should pay less? What gives you that right - besides your amazing hubris?

Methinks -

This is the last time I'm going to engage you on this if this is how you're going to approach the discussion. Nobody gives me the right to decide how much anyone gets to keep and who should pay more and who pay less. I don't claim the right to decide that.

Danny,

If you don't want people inserting themselves into your conversations, have them privately.

But I'm fairly comfortable saying that everybody's utility curve is concave, and if that's true than a tax policy that equalizes marginal disutility across society has to be somewhat progressive.

Across society. So, the individual doesn't get to decide his own curve? He also doesn't get to decide how to disgorge his own wealth - it must be confiscated by the State because he is not an individual but a cog in the wheel of "society.

The ONLY thing I have to assume for that to be true is that you have a diminishing marginal utility for money.

No, the only thing you have to assume for that to be true is that the State ultimately owns every individual and can do with it what it pleases. To make that statement, you must hold that view.

I can't fathom why that's so offensive to you.

That's the problem.

This is the last time I'm going to engage you on this if this is how you're going to approach the discussion.

I shaking in my boots. So far, you make a claim and then claim that not what you said. Maybe you should only talk to people who think you're brilliant

To understand the issue of attitudes towards the income taxes, which is the only thing rational to discuss when we are addressing individual attitudes because the excises taxes slip under most people's awareness, one only has to go back and look at how many so-called taxpayers were not volunteering a 1040 every year before the FDR sidekick invented "withholding" during WWII.

When people know it is voluntary and they have all their fruits of labor in their own pocket, they aren't too damn eager to send any in to government, and those data prove it, "withholding" would never have been considered necessary if there had even been decent participation by the public.

Even those mental midgets that say they think taxes are justified and that "they" would send in their voluntary tax form every year regardless......they are lying. it would take them no more than a year to either reduce their contribution or cease it altogether.

Taxes, in no other single subject do I see greater crippled thinking, so much so that I cringe at labeling as thought what I know be no more than enculturated drivel.

If I was a billionaire, I would be re-domiciling right about now.

Daniel Kuehn: "It's not socialist. "We" are talking about a surtax on the rich."

Certainly sounds similar to the preaching of the most famous of all socialists:

"From each according to his ability, to each according to his need".

Daniel Kuehn: "100% behind making the tax structure at least marginally more progressive at some time in the near future"

For what purpose? to further your socialist agenda? because you enjoy thievery? because you envy those whose efforts are economically more valuable than yours?

Daniel Kuehn: "I suppose I'd be OK raising taxes for someone making $350K a year"

That's certainly not surprising. And when such taxes are insufficient to fund your socialist agenda, what then? raising taxes for someone making $250K? establishing geographic cost of living adjustments so that you can tax the Arkansas equivalent of a New York $350K income?

Be very careful, John Dewey. Such misunderstanding of Danny's position may result in a good old fashioned shunning.

Did Danny say he had a socialist agenda? No. He only said that the rich perhaps need progressive taxes (because that's totally different from a surtax on high earners). See, somebody (with no agenda, obviously) decided we all have one optimal utility curve. Thus, since he has determined the money has negative value to you above that point, it only makes sense that Obama and Nancy Pelosi take it from you.

Sure, you could just start a charity with it or give it to a charity that you want to support and that might have some utility to you, but where's the government waste in that?

The important thing is that Danny is pretty sure that this is maybe his position but he doesn't really want to commit just in case he's misunderstood to be a socialist.

Methinks - Daniel might subscribe less to the moral position of socialism then what he perceives to be practical successes. After all, aren't Sweden, Denmark and Germany doing just fine with 60% socialist systems?*

* I know they're NOT doing just fine, and the USA has subsidized their national defense for 60 years. Just putting the standard leftist argument out there.

Moral? Why, crusader....how could it possibly be considered so immoral to relieve people of money you've (sorry "we") determined provides such scary bad disutlity? Why, taking it is a downright public service. The high earner wins and your social welfare thingie wins. It's all win/win and ponies.

Methinks - the real debate we should be having as a society is what % of wealth belongs to the public based on how public expenditures of infrastructure facilitated wealth creation. Surely you don't think that every rich person got that way by sheer gumption? Heck, even I went to a subsidized public university. I think the fairer solution would be less spending on parasitical welfare programs and more on public infrastructure(power plants, repairing bridges,etc...). Things that benefit all men and women.

It's all win/win and ponies.

Posted by: Methinks

Just awesome.

These people also think you can cure cancer thru interpretive dance.

It's true that the vast majority of lefties don't even want to debate the merits of their ideologue. They simply engage in ad hominem attacks like muirgeo. It's simply easier to that, less mental effort involved. However I personally couldn't do it because I'd lose self-respect if I couldn't intellectually engage anyone.

The slippery slope argument is so cliché, but it’s right here.

Who determines what’s immoral?

This wacky bitch?

I don’t think so.

The minute you start throwing around subjective terminology in relation to confiscating another’s wealth, earned or not, you start down the slide to serfdom. Or was it a road….?

Anyway, were there shenanigans (Shenanigans, I tells ya!) on Wall Street? Absolutely. That’s part of the deal – in order to ensure a free-functioning, incentivized and productive society, you need to tolerate a certain amount of malfeasance and (perceived) misdeeds. The normal checks-and-balances take care of the rest (incentives).

You think that Barney Frank knows what should be done with financial regulation? He knows nothing, yet we entrust him with that very task. You think that Nancy freaking Pelosi knows anything at all?

Sorry, closing tag, again. Anyone else having trouble with Firefox update?

And no, I’m not interested in what petulant, vacuous, juvenile dim-bulb muirhole has to say. Ever.

Have you ever considered the curious fact that tax day and election day are six months apart? I would like to see them much closer together - the same week, or even the same day!

Crusader, Why should power plants be viewed as public (taxpayer-financed) infrastructure?

Taxes are extortion.

"FDR sidekick invented "withholding" during WWII"

You can thank the pseudo-keynesian Milton Friedman for that.

"FDR sidekick invented "withholding" during WWII"

You can thank the pseudo-keynesian Milton Friedman for that.

screwed up the link

Methinks -

Re: "Be very careful, John Dewey. Such misunderstanding of Danny's position may result in a good old fashioned shunning. "

Not at all - he didn't call my ideas bullshit like you did. I would clarify, Crusader, I don't think Germany or Sweden provide examples worthy of emulation. I have some admiration for Denmark's unemployment insurance system, but I'm not even sure what value that would have here - it seems better suited to transition a European-style labor market to an American-style labor market, rather than as something to operate in an American-style system.

"See, somebody (with no agenda, obviously) decided we all have one optimal utility curve."

What is an "optimal" utility curve? That makes no sense. A utility curve isn't optimal or non-optimal. It just is what it is. And who said we all have one curve? I'm not quite sure what you're talking about or who you're refering to.

"Thus, since he has determined the money has negative value to you above that point"

Sacrebleu! Does global non-satiation mean NOTHING to you?!?!?!?!

RE: "The important thing is that Danny is pretty sure that this is maybe his position but he doesn't really want to commit just in case he's misunderstood to be a socialist."

No - just in case it's wrong. The fact that I'm not really a socialist is coincidence. If socialism were right, practical, or moral I suppose I wouldn't have a problem with it.

So Methinks - maybe I missed it. Spell out to me exactly why it's unethical to equalize the marginal disutility of taxation in a tax code.

Chuck,

I am deep into the income tax fraud, and I don't believe you're correct about that. I am certain it was someone in FDR's inner circle that came up with the idea.

I will go back to my sources and look it up again and put a name to him, as I know I have seen it and Milton Freidman is not the guy.

Chuck,

Secretary of the Treasury, Henry Morgenthau, a crony of FDR.

While the idea of withholding had been known before (going back to the Civil war), but not done because of the, inability of government to come up with the mechanism, Morgenthau was the man who brought it to the table and the force that pushed until the present system was created.

Milton Freidman was but a minor official in the treasury department at the time and may have had input into devising the mechanism, but was certainly not the man who brought it to the USA.

Pfff. I believe Irwin Schiff went to jail using much the same arguments to believe he could legally not pay taxes, vidyohs. You're probably better just stating taxes are theft than accidently send Libertarians to jail on false advice.

Personally, I love Daniel's argument here, not because it is correct but because it clearly outlines the left's love of authorities.

Daniel states that he thinks that everyone has a utility curve for money that starts high and ends low.


He then states that he does not know where that curve lies for everyperson, but he thinks that it can be reflected in tax policy.

In other words, he admits that he has no way of knowing the exact nature of the utility curve for any given person other than it's rough shape, but he firmly believes that there is a person out there who does. He further believes that he and the other 300 million voters out there can decide which person out of the 300 million can make that decision and vote that fellow or filly into office.

It never occures to Daniel, or really any statist, that their politicians are much like them, with all the same foibles and limited capacity for knowledge, and thus are no better able to dictate just the right progressive tax rates or balance of health care for 300 million than the guy who delivers mail in your office.

Most people reach a point in their lives when they realize that their parents do not have all the answers, and are just as fallible as they are, just with some more experience. For some reason or another, however, relatively few people ever come to this realization about political leaders.

People think the income tax they pay is about right because they are presented with a tray that says "food" and a button that says "taxes to pay for food," so they push the button to get the food. They don't know that there is a hidden button that will give them the food without taxes. If they knew, they would no longer push the tax button.

Eric -

RE: "In other words, he admits that he has no way of knowing the exact nature of the utility curve for any given person other than it's rough shape, but he firmly believes that there is a person out there who does."

Perhaps that was unclear. Let me state clearly - not only is there know one that knows what peoples' utility curve looks like, but it is impossible for anyone to ever know that.

RE: "It never occures to Daniel, or really any statist, that their politicians are much like them, with all the same foibles and limited capacity for knowledge."

No, I make this same point quite often.

All I've suggested is that a progressive tax structure of some sort is ethically ideal. Are you challenging the only assumption that I made - that there is a diminishing marginal utility to money? I haven't heard anyone suggest otherwise - but perhaps you'd like to. Either way, that's the only assumption that I claim. And the only conclusion that I claim is that a progressive structure of some sort is best. Of course nobody knows what that structure should be or what individual preferences look like. The only mechanism we have for accurately revealing individual preferences is the market. So in terms of revenue collection, we're up a creek - we have nothing to resort to and we should not expect a perfect or even an optimal solution.

But I think we can make a conclusive argument for a progressive tax structure in general.

This isn't really a leftist argument, you realize. It has nothing to do with radical politics or leftist perspectives on society.

*no one who knows

If socialism were right, practical, or moral I suppose I wouldn't have a problem with it.

You don't. You have a problem reconciling your socialist beliefs with socialism's failures.

What is an "optimal" utility curve? That makes no sense. A utility curve isn't optimal or non-optimal. It just is what it is. And who said we all have one curve?

"Optimal utility curve” is sarcasm. I would have thought a card-carrying economist who just implied that he knows where to start confiscating more income through taxation would have gotten that. I will explain what I mean in my dumbed-down non-economist way.

If I put forth the time, effort and risk to make $3MM per year, what right have you to assume that my marginal utility begins to decline at any level below $3MM and that it’s fine to assume that my marginal utility begins to decline at $100K, making it okay to progressively tax away anything above that income level?

I assure you that I know exactly where my marginal utility begins to decline and I will adjust my work/leisure ratio to reflect that without the help of the “we” you’re so fond of. I can also assure you that every other human being knows what their utility curve looks like with respect to income and will adjust without the help of social engineer wannabes. Even muirpid.

BTW, Marx gave "from each according to his ability to each according to his need" a bad name because he advocated the use of coercion.

Judging by your earlier statement on the subject, the difference that neither you nor Marx see is that families and other communities adhere to this dictum voluntarily. Marx and other socialists favour the use of coercive force and the imposition of a single end to thrust unwilling strangers into this less than cozy relationship.

I challenge you to find a single regular commenter on this blog who is opposed to such a voluntary relationship.

RE: "I challenge you to find a single regular commenter on this blog who is opposed to such a voluntary relationship. "

I don't accept the challenge because I agree with you on that.

But coercion of some sort was on the table well before Marx - his contribution was the scale of the application of the dictum, AND the purpose of the redistribution. I don't agree with him on scale or purpose, and I have common cause with many other pre-Marxists who agreed with the general principle of coercion, so I really don't see why my views are especially Marxist.

Since about 45% of households pay no federal income taxes, I can see why they would feel their taxes are "about right."

Cole - good point. I suspect that the remaining 13% pay the lowest income tax rate.

Of course, I think any federal income tax is too high. Allowing the taxing of income means the government has to know everything about every dollar that everybody earns. It's an invitation for an unacceptable level of intrusion into our lives. (I'm not sure that's an unintended consequence)