Don’t Know Much Tax Policy

Sub-head: The Mortification of Sam Cooke.

As Tax Day approached, the Washington Post and NPR were among those publishing pieces on Americans’ ignorance of tax policy.  The headline of the WaPo piece conveyed the general attitude: “People don’t like paying taxes. That’s because they don’t understand them.”

In fairness, the author of the WaPo piece doesn’t actually make that claim.  And it would be a line of argument more absurd than claiming that the reason people don’t like visiting the dentist is because they don’t understand the purpose of doing so.

NPR went so far as to commission an Ispos poll to quantify our ignorance.  But the poll may say as much or more about the likes of NPR or the WaPo as it does Americans’ knowledge of tax policy.

Indeed, as one reviews the poll results and NPR’s analysis, you might wonder: “If only there were people whose job it was to inform the public about public policy…”

NPR starts by noting that 2012 GOP presidential nominee Mitt Romney was basically correct in observing that 47 percent of Americans don’t pay federal income tax, but people seem to have forgotten it.  Perhaps that’s because the establishment media is only interested in this sort of statistic when it can be used as a cudgel against a Republican.  Left-leaning journalists don’t highlight the number of people who don’t pay individual income taxes.  Stop the CMSes.

According to the poll, a majority of Americans also think low-income people pay too much in income tax, despite most of that 45-47 percent being low-to-middle income.  Again, you could see why a left-leaning media is largely uninterested in correcting that misconception.  But NPR helpfully conjectures that maybe people would support even more tax transfers to the poor, “regardless of how the current tax code looks.”  So why do we care whether Americans know these details again?

NPR then had Ispos a true or false question: “For the highest earners, the percent of federal income taxes they pay now is significantly higher than it was in 1980.”  NPR seems to have deduced after the fact that this was a bad question.  If “percent” is taken as the “rate,” the correct answer is “false”; if “percent” is taken as “share,” the answer is “true.”  That doesn’t stop NPR from choosing the former as the “correct” way of reading the question in its accompanying graphic, which tells you how NPR saw it before they got the answers.

However, if the point is to demonstrate an ignorance of tax policy, the real question is why NPR cares about the marginal tax rate for the highest earners.  Individual income tax revenue as a share of GDP was an identical 8.7 percent in 1980 and 2015 (the last year for which we have final figures), despite the top marginal rate being 70 percent in 1980 and 39.6 percent in 2015.  And the share was lower in the 1950s, when the top marginal rate was 90 percent.

The top marginal rate does not come close to telling the story, given the complexity of the Internal Revenue Code.  And the remarkable stability of individual income taxes as a share of GDP over the decades since WWII might have a story about economics and politics to tell NPR, however much the staff may not want to hear it.

Instead, NPR would like to spin its cherry-picked statistic as a tale of income inequality instead of a tax code that has become far more progressive — one of the most progressive tax systems in the world.  That’s far more comforting than facing the possibility that there is a practical limit on how much one can tax “the rich” to fund an ever larger and more intrusive government.

NPR also reaffirmed that Americans overwhelmingly agree that “The tax rate on income from work should be lower than the tax rate on income from wealth.”  NPR added: “This is another result that might make the richest Americans squirm,” because apparently making “the rich” squirm is the true aim of American tax policy.

If NPR was truly interested in our collective ignorance about tax policy, they might have asked how many Americans understand that capital gains taxes are: not indexed for inflation; a double tax on income; and encourage present consumption over future consumption.  Or that U.S. cap gains tax rates are above the average for other developed nations.

NPR’s poll then finds 49 percent of Americans think 75 percent of the federal government’s revenue comes from personal income taxes (when it’s really about 47 percent).  NPR then notes: “Of all the taxes Americans pay, income tax probably requires the most thought. After all, payroll tax comes automatically out of each paycheck. Sales tax is imposed at the cash register. And so on.”

If NPR wants to complain about Americans’ ignorance about taxes, it might have considered whether government prefers less transparent, more automatic taxes — withholding payroll taxes being the classic example — precisely because politicians want Americans to be ignorant of how deeply they’re reaching into our pockets.

Lastly, NPR is miffed that the GOP’s efforts to rebrand the estate tax as a “death tax” is effective in making it less popular, especially among Democrats.

Of course, the progressive bias of the media is not the only reason outlets like NPR don’t really want to cover tax policy in depth.  I’ve previously invoked the old adage that “great minds discuss ideas; average minds discuss events; [and] small minds discuss people.”  It’s much easier to draw an audience obsessively covering the circus atmosphere of the Trump administration, or a doctor dragged off an airplane, or the doctor’s lawyer’s press conference than tax policy.

Moreover, I suspect the establishment media privately thinks as I do:  that public opinion on taxes is basically governed by the notion of “I would prefer that someone else pay more taxes, while I pay fewer.”  This extends to the olds burdening the youngs with a future higher tax burden to support their entitlement programs.  The establishment media really doesn’t want that to be the big story.

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