Voters press repeat

White House/Pete Souza

President Barack Obama, with Vice President Joe Biden, delivers a statement to the press on the economy, in the East Room of the White House, Nov. 9, 2012.

Article Highlights

  • Voters pressed “repeat” on a divided government.

    Tweet This

  • And a repeat is what we got: same problems, same faces, same talking points.

    Tweet This

  • Unfortunately, the White House has done little to educate the public on who pays how much of our taxes.

    Tweet This

After last Tuesday's election, the president insisted that when it comes to raising taxes on the wealthiest Americans, "The majority of Americans agree with my approach." He did, after all, win the election. However, what happened on Election Day could hardly be construed as an enthusiastic endorsement of either the president's policies during his first term or his plans for the second. Consider:

Remember that last week, voters also re-elected Republicans, who retained solid control of the House and increased their share of governors. So, it's far more accurate to view the election as a stalemate than a mandate. In short, voters pressed "repeat" on a divided government.

And a repeat is what we got: same problems, same faces, same talking points. To reach adeal to avoid the looming fiscal cliff, the president called for raising taxes rates on individuals earning more than $250,000 a year; Republicans countered with plans to increase tax revenues without raising tax rates.

Many Americans admittedly do favor higher taxes on "the rich,"[3] but they do so from a position of great ignorance. For example, less than one quarter of the public correctly realizes that high-income taxpayers pay a higher percent of their income in federal taxes than any other income group.[4]  Three other inconvenient truths contradict progressive perceptions that the rich are not "paying their fair share" of taxes.

However, there's at least three major problems with that line of reasoning:

  • First, the U.S. already has the most progressive tax system among the OECD-24  (the 24 countries that belong to the Organization for Economic Cooperation and Development). That is, the share of taxes paid by the top 10 percent of taxpayers exceeds their share of national income by 35 percent. For all of the U.S., the average taxpayer's share of taxes exceeds his share of national income by just 11 percent. More remarkably, in countries many perceive as having greater equality-Sweden, Norway and Denmark-the top 10 percent's share of taxes is nearly identical to their share of national income.
  • Second, although the Bush tax cuts have been widely derided as a handout for the wealthy, the cuts increased the progressivity of the federal tax code. For taxpayers earning more than $100,000 (including the tiny group of taxpayers earning $10 million or more a year), the share of taxes they paid compared to their share of national income grew between 2000 and 2004. Meaning, after the Bush tax cuts became effective, these individuals paid a higher proportion of total taxes. Not surprisingly, over the same period, all individuals earning less than $100,000 saw their contribution to taxes shrink. Despite the president's failure to repeal the Bush tax cuts for those at the top, the federal income tax system has become even more progressive since 2004, not less.
  • Third, voters are woefully ignorant about the amount of taxes paid by "the rich." For example, a Harris/Tax Foundation survey in February 2009 asked "What is the maximum percentage of a person's income that should go to taxes - that is, all taxes, state, federal, and local?" On average, respondents said about 15 percent.[3]  Yet the average federal tax rate on those in the top 1 percent of income in 2009 (latest figures available from CBO) was almost 29 percent-nearly double the maximum that the average voter thought should be levied by all levels of government.

Unfortunately, the White House has done little to educate the public on who pays how much of our taxes. Instead, evidence suggests President Obama's repeated divisive efforts to raise public support for more taxes on "millionaires and billionaires," are working. The percentage of Americans who thought that upper-income taxpayers paid too little had declined rather steadily from 77 percent in March 1992 to 55 percent in March 2010. Thanks in part to the President's hectoring on this issue, this percentage had climbed back to 62 percent by last March. It is regrettable that the bully pulpit works just as effectively for a president determined to exploit public opinion as one more willing to educate the public.

Last fall, Bill Clinton wisely noted that when the economy was weak, raising taxes even on the rich would be a very bad idea. Even the president knows raising taxes in a weak economy can slow an economic recovery, which is precisely why he agreed to an extension of all the Bush tax cuts-including on the wealthiest-back in 2010. At[o1]  the time he spoke, GDP growth in the most recent quarter was 2.5 percent. Yet this year, GDP growth has been lower than 2.5 percent for each of the last three quarters. And despite some reduction in the unemployment rate, the unemployment rate is higher today than at any time during the Clinton administration.

If the president is successful in raising tax rates, the result could make more Americans, and not just the wealthy, worse off. That would be a tragedy for a country that can't afford to repeat the same economic performance of the past four years. If the president's "my way or the highway" insistence on higher tax rates sends us over the fiscal cliff, that's surely not an outcome that any rational voter would have chosen this election.

 

Footnotes

[1] Lest readers get confused or think I am playing fast and loose with the truth, President Obama is the first to achieve the three listed metrics simultaneously. Taken individually, George Will has pointed out that "Obama is only the second president (Andrew Jackson was the first) to win a second term with a reduced percentage of the popular vote, and the third (after Madison and Woodrow Wilson) to win a second term with a smaller percentage of the electoral vote."

[2] Using the vote totals reported by the NY Times, Governor Romney needed to flip a mere 36,595 Obama votes to win Florida's 29 electoral college votes;  he needed to flip only 51,760 votes to win Ohio (18 electoral votes);  he needed to flip 67,956 votes to win Virginia's 13 electoral votes;  and he needed to change only 20,330 to win New Hampshire's 4 EVs. Total: 166,641 changed votes would have given Romney an Electoral College win.

[3] Exit polls show that 47% agreed that taxes on those with incomes above $250,000 should be increased, versus 13% who thought taxes should be raised on everyone and 35% who thought taxes should not be raised at all.

[4] This is based on a Kaiser/NPR/Harvard poll conducted in February-March, 2003 and reported on p. 35 of AEI's comprehensive compendium of public opinion about taxes. In that survey, 52 percent believed middle-income taxpayers paid the highest share of income in federal taxes, while 11 percent thought low-income taxpayers did. Only 24 percent correctly reported that high-income taxpayers paid the highest share of income in federal taxes. The CBO periodically reports on this issue and has consistently shown that since 1979 (the first year figures were reported) the highest-income group (whether defined as the top 20%, top 10%, top 5% or top 1%) pays a higher share of its income in federal taxes than any other income group.

[5] This is based on a Harris/Tax Foundation poll from February 2009, as reported on p. 19 of the AEI compendium.

 

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Christopher J.
Conover

What's new on AEI

Making Ryan's tax plan smarter
image The teacher evaluation confronts the future
image How to reform the US immigration system
image Inversion hysteria
AEI on Facebook
Events Calendar
  • 01
    MON
  • 02
    TUE
  • 03
    WED
  • 04
    THU
  • 05
    FRI
Wednesday, September 03, 2014 | 9:00 a.m. – 10:30 a.m.
From anarchy to Augustus: Lessons on dealing with disorder, from Rome’s first emperor

We invite you to join us for two panel discussions on how Augustus created order from chaos 2,000 years ago, and what makes for durable domestic and international political systems in the 21st century.

Event Registration is Closed
Wednesday, September 03, 2014 | 12:00 p.m. – 1:30 p.m.
Multiple choice: Expanding opportunity through innovation in K–12 education

Please join us for a book launch event and panel discussion about how a marketplace of education options can help today's students succeed in tomorrow's economy. Attendees will receive a complimentary copy of the featured book.

Thursday, September 04, 2014 | 12:00 p.m. – 1:30 p.m.
How conservatives can save the safety net

Please join us for a luncheon event in which our panel will discuss what conservatives can learn from how liberals talk and think about the safety net and where free-market economics, federalism, and social responsibility intersect to lift people out of poverty.

No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.