Fox News released a poll on Thursday that showed 79 percent of respondents believe ???all Americans should pay some federal income tax ??? even if it???s as little as one percent of what they make.??? This included huge majorities across the partisan divide, but noticeably higher for Republicans and independents (85 and 83 percent, respectively) than Democrats (71 percent.)
The poll came in response to Mitt Romney???s ???47 percent??? video, in which he mused upon the difficulty of selling a low-tax, pro-growth agenda to people who are dependent upon government programs, but don???t pay income taxes. The Fox News poll revealed a very high level of familiarity with the basics of this video, and also a very strong 63 percent majority who thought ???the substance of Romney???s comment about dependence on government is mostly (36 percent) or somewhat true (27 percent).???
A suspicion I???ve always held about the dependency discussion is supported by the poll???s discovery that 76 percent of respondents believe the average American is at least somewhat dependent on government, but only 31 percent believe they personally are. I???ve always had a feeling that Romney???s supposedly devastating ???gaffe??? wasn???t going to hurt him all that much, and might help him in the long run, because most listeners who aren???t already die-hard Democrat voters don???t find his observations in the least bit improbable or outrageous??? and very few of them think they personally belong to the ???47 percent.???
There has been considerable discussion of Romney???s remarks on the Right, including some criticism of his percentages ??? the number of people who don???t pay income tax does not precisely correspond with government dependency ??? and disagreement with his assertion that reaching the dependency class with a pro-growth tax reform message is too difficult to be worth serious effort. These are fascinating and worthy discussions, but I thought part of what Romney was driving at was more a question of perception than precise economic reality.
The population that sees itself as Romney described them ??? eager to defend government benefits they don???t personally finance ??? does not exactly correspond with the number of people who actually do have zero, or negative, income tax liability; who receive more in direct subsidies and benefits than they pay in taxes; or who feel dependent upon government programs, regardless of how much they pay in federal income tax. In fact, class warriors have enjoyed considerable success at convincing people who do pay taxes, and would benefit from tax reduction, to oppose it because nameless rich people would benefit more.
Quibble about the exact percentages if you must, but Romney doesn???t seem all that far off in describing the portion of the electorate that generally thinks government must do more, and other people should pay for it. But when you put the purest expression of the ???free rider??? question to Americans, as Fox News did, the result is a much higher percentage that agrees everybody should be paying something.
The very complexity of the tax system is one reason for these contradictory perceptions. There are several ways to hit zero tax liability. A very low income level is one of them ??? depressed economies naturally produce more people with no federal tax liability. Another way is to use deductions and credits to offset your income, which brings us back to the ???effective tax rate??? concept. We???re supposed to grow very perturbed by the effective tax rates of people in Mitt Romney???s income strata, but we???re not allowed to discuss the effective tax rates of the lower income brackets at all.
The only way to reach a more truly fair, widely dispersed tax system ??? in which everyone pays something, and public perceptions of who pays how much correspond fairly well with reality ??? is to have a very flat tax with extremely simple deductions, in which a very small percentage of the population can completely erase its tax liability. You???re always going to have some people who simply do not generate significant taxable income during a year, but a robust economy will hopefully keep this percentage relatively small. Also, eliminating many of the hidden taxes we all pay would get us closer to appreciating just how much of the load each American carries. So would moving away from absurdities like payroll withholding, which is a huge does of anesthesia designed to numb middle-class flesh before the feeding tubes of Big Government are inserted.
We???ve been moving further and further from that ideal, shifting more of the tax burden to the upper income groups along the way. A July 2012 study from the Tax Foundation showed that the tax code has become increasingly ???progressive,??? as ???the share of taxes paid by the top 1 percent has increased from 18.4 percent in 1979 to 38.7 percent in 2009. In contrast, the share of income taxes paid by the bottom four quintiles has decreased since 1979, particularly since 2007.??? At the lowest income levels, refundable tax credits have actually turned the tax code into a welfare program ??? they receive annual ???tax refunds??? which exceed the amount of tax they actually paid during the year.
The tax code is a mess, no one understands it, and no one has a truly accurate perception of where anyone else stands within it. We cannot fairly be said to enjoy enlightened self-government as long as this state of affairs continues, and indeed worsens.