Here is an amusing Gallup Poll as reported by the Wall Street Journal: 57% of Americans Say Their Income Taxes Are Too High. Only 55.5% Pay Income Tax. What?
A recent Gallup poll pegged the percentage of Americans who think their own federal income tax bills are too high at 57%. That’s up from 51% last year and it’s the highest level since 2001, just before the Bush tax cuts became law.
Here’s the problem. Just 55.5% of American households will pay federal income taxes in 2016, according to the Tax Policy Center.
What is going on here?
One possibility is the survey itself. The Gallup poll has a 4 percentage-point margin of error and it’s asking people about income taxes at the very moment they’re angriest about them—the run-up to Monday’s tax-filing deadline.
The second possibility is that Americans aren’t distinguishing between income taxes (what’s reconciled on your annual return) and payroll taxes (what comes out of your paycheck often labeled as FICA) for Social Security and Medicare. For about two-thirds of all households—and three-quarters of households making $40,000 to $75,000—the payroll tax is bigger than the income tax, according to the congressional Joint Committee on Taxation. And none of that includes state or local taxes.
So Americans may be responding to a different question from the one that Gallup asked.
There may also be some election-year politics at work.
Republican presidential candidates Donald Trump and Ted Cruz are campaigning on enormous tax cuts, and they’ve clearly got a receptive audience: 73% of Republicans say they pay too much.
I would be curious to know what percentage of Republicans pay no income taxes but the survey did not say.
Mathematically speaking, the reported setup is not impossible even if the Journal missed the reasons.
In this era of negative interest rates, “free” services, free food stamps, etc., people apparently want negative taxes as well.
I jokingly proposed negative taxes to a friend the other day. I have been meaning to write that up and will do so later.
Mike “Mish” Shedlock
Why are you so surprised? Income taxes are an affront to your personal safe space. Your belief in a need to pay income taxes is as ludicrous as the idea that a Eurozone country should not be given subsidized and negative interest rates so that it can pay for the necessities of socialism using printed money from the ECB. Europe has a God given right to early retirement and free things. The USA has a God given right to have a stock market that only goes up no matter what, low interest rates so our betters can prosper as they should, and student loans that are unbelievably easy to get. Income taxes are an insult. As we all know, eliminating them will cause economic activity to boom past the point of reason just as zero level interest rates have given our senior citizens a feeling of comfort in the knowledge that the wealthy are better off. The Federal Reserve can cover the slack if the Federal Government needs some money.
“The second possibility is that Americans aren’t distinguishing between income taxes (what’s reconciled on your annual return) and payroll taxes (what comes out of your paycheck often labeled as FICA) for Social Security and Medicare.”
Yeah, well,…. NO DIFFERENCE.
FICA taxes are dumped into general revenue and spent in current year.
In return Social Security and Medicare trust funds get NON MARKETABLE securities (IOUs). The $5 trillion+ in those trust funds is a charade. The moment current FICA revenue doesn’t cover entitlements payments Congress will have US Treasury issue treasury securities to raise the $$s needed to cover shortfall … unless taxes raised … or entitlements cuts … or combination.
Well, I pay income tax. But even if I didn’t-: They are to high. You do not need to wage a war in order to think war is bad?
And how many of those Americans who pay little or no income tax or FICA vote responsibly other than to expect to “get” from the govt. Human nature would suggest that our already dysfunctional political and financial system is further degraded by any voter without financial. “skin in the game”.
They HAVE negative taxes – the SAME 48%. Have children? Didn’t pay ANY taxes? No problem, file and collect your child TAX CREDIT!! Indiana investigated a couple several years ago and found people “claiming” an inordinate amount of children, went to the address and found a trailer with no one there. Three guesses where the filers were “from”? And of course, the Fed’s mailed the check, no questions asked.
Let me repeat myself so there is no question.
Income Taxes are for Chumps.
Current economic theory, as proposed, implemented, and embodied by Keynesian monetarists at the Federal Reserve and the ECB, have proven – yes proven – that printing money to support deficit financing is an effective way to support a sovereign entity without direct taxation. Managing interest rates to fantastically low levels and/or negative levels is the missing element that makes it work swimmingly.
Of course, the depressed spending that results from a decrease in interest income is a cost that is outweighed by the benefits of a free ride by people who either make lots of money via low rates or people who live on free stuff provided by the government or someone else.
The way to beat the system is to not save, spend like there’s no tomorrow, and demand free benefits from the government .Or use lots of low interest rate borrowed money and invest in financial instruments at high leverage. If you win, you’re rich and buy real estate. If you lose you stick someone else with the cost and declare bankruptcy. In this way central banks will keep interest rates low and savers will buy government debt at low rates, or negative rates, thus supporting the idle rich and idle poor.
“I jokingly proposed negative taxes to a friend the other day. I have been meaning to write that up and will do so later.”
I jokingly proposed a mandatory mark-to-model wage structure. If the model deems a bachelor’s degree holder merits a salary at or above $45K, it mustn’t matter one iota what they are employed as, whether coffee barista or nuclear power plant operator.
The banks are marking to model(i.e. fantasy) all of their delinquent loan assets, so why can’t the student loan slaves have their labor marked-to-fantasy?
I am a CPA and happily done with taxes for a day or two before digging into the pile of extensions. I have an interesting practice. Mostly well off businessmen and professionals. People in the 1% (I am NOT looking for new clients). I would like to throw this in the mix. I have a fairly even split between Republicans and Democrats, although one crusty Conservative has told me if Trump is the nominee he will vote for Clinton, and they complain about taxes based on who is in power. If a Republican is in the White House, tax levels are fine with the Republicans and the Democrats gripe about taxes being too high and what it is spent on, and the exact opposite when a Democrat is in the White House, the Republicans bitch and moan and the Democrats want to pay more, yes I did write that. So clearly a lot of this has to do with politics and what it is spent on. But having your guy in power is very determinative as to your view of tax levels.
No income tax for me this year. But wait there’s 15% social security, another 10% state/local, and the bloated health insurance premium(tax) at 20% of income this year. That’s already 45% . I’ll trade my current total tax rate with anyone paying income tax at the highest marginal rate. Not paying federal income tax really isn’t such a good deal.
You are misreading these results. These are people who get huge returns from an earned income credit. They are complaining that they need even bigger returns. They are not even aware that they pay no taxes. To them lower taxes mean bigger returns.
People interpret “income tax” as anything taken out of their paycheck before they get to spend a dime. And yes, SS and Medicare are a tax. (Money taken by government to spend as they see fit.) The interesting part is that most of these respondents don’t even see the other half of the SS tax they pay, but don’t see as it is paid directly by the employer. And yes, it is the employee that pays that tax even if it never goes in to their paycheck. (Though you could also argue it is their customer’s money as prices would be lower without that tax.)
The income tax is not too high, in my opinion. However, taxes overall are very high, if you add up every tax you pay on everything.
Any income tax, like any other activity tax, is too high if it exists at all.
Taxing people’s activity, presupposes a government able and willing to spy on every activity performed by everyone.
Tariffs and straight up land taxes are really the only remotely simple taxes that don’t run afoul of the above. Which is why the feds should fund themselves via tariffs and nothing but, and localities with taxes on land.
Hell, I still have loss carry forewords from 2008 so have not paid taxes since. But I am retired so only wife’s income less the carry forewords and no tax!
-When asked, most Americans don’t know the difference between the deficit and the national debt; even economists ramble on about the horrors of national debt without including anything on the private debt load.
-When asked, Americans think they should spend far less on foreign aid, but when asked how much it should be, they typically come up with numbers like “no more than 20% of GDP” (it’s only 2‰, less than 1% of the the fed’s budget).
-I would chalk up the disparity to a complete inability to distinguish income tax from taxation in general. Fact is, a lot of articles on tax policy fail to mention that income taxes only amount to ⅓ of total tax revenue (incl state & local; a tad more of revenue, a tad less of expenditure). In general the effective tax burden is regressive at the state & local level (some may even pay state income tax but no federal income tax).
Everyone pays income tax, whether directly or in in the form of higher prices at the store. If workers at the local grocery store have to pay income tax on their wages, the store has to pay them a higher wage, so the store has to charge a higher price for food.
Renters have to pay a higher monthly rent if their landlord has to pay income tax, property tax, etc… Landlords necessarily have to charge enough to cover costs after all taxes and other expenses.
I bought a new corvette for somebody besides me this year. I will say taxes are to high.
The sick part of FICA taxes are that they are levied from dollar one. If you are self-employed and make a lousy $10k, you are paying $1500 in taxes. This is the biggest rip off for the poor. These taxes shouldn’t not be levied until they hit $12k in income. We know that this money won’t be around for most of these people but they are forced to pay into it to keep the Ponzi going.
We have negitive tax rate for those who qualify for EIT. My tax rate with EIT added is -20%
Why is it that no one just asks the basic question: How much money do you have left each month after paying payroll tax, medicare tax, federal income tax, state income tax, city tax, sales tax, tolls, property tax, rent/mortgage, AMT, if applicable, contribution to health care costs, andy any contributions to IRA/401K’s? Who the hell cares if its federal or state or local? My federal taxes have been more or less stable over time. It is the state, local, sales, tolls, healthcare contribution that is rising faster than take home pay. You live based on after tax and fees income. There is remarkably little written or analyzed that looks at all of this from a holistic standpoint. If you did, our TOTAL tax and fee burden would suddenly be closer to the Nordic countries. But they have universal healthcare, have far more social benefits, and have far less a burden with respect to higher education costs.