We retired Tax Justice Blog in April 2017. For new content on issues related to tax justice, go to www.justtaxesblog.org
While poll after poll has long confirmed the overwhelming public support for progressive taxation in principle and increased tax revenues for deficit reduction, some polls that pop up every so often seem to contradict these results. Below we deconstruct two common errors seen in recent polls.
Marginal vs. Effective Tax Rates
Some survey questions fail to distinguish between marginal and effective tax rates. A marginal tax rate is the percentage of the last dollar of income received (by a given taxpayer) that will be paid in taxes. An effective rate is the total amount of taxes a person pays as a percentage of his or her entire income.
For example, when we say a person is in the “25 percent income tax bracket” that means that (generally) 25 percent of the last dollar of income received by that person will go towards federal income taxes. This person has a marginal income tax rate of 25 percent. But his effective income rate might only be around 15 percent or less. That’s because some of his income is taxed at lower rates and because some of his income is not included in taxable income at all (because of deductions).
The recent poll from The Hill is a case study in how conflating the marginal and effective tax rate can create bogus poll results. The Hill survey asks what the respondent believes is the most appropriate “top tax rate” for families earning $250,000 or more and corporations, and then lists out percentage options.
The problem is that the survey does not clearly distinguish whether the “top rate” being discussed is the effective or marginal top rate. In their coverage of the poll, The Hill reports that about three-quarters of likely voters support lower taxes on corporations and wealthy individuals, which just doesn’t sync with what the majority of current polling tells us. The Center for American Progress’s Seth Hanlon explains why. He points out that if respondents believed that the ‘top rate’ mentioned in the survey was meant to indicate the effective rate, then most respondents actually came out in favor of higher taxes. For example 67 percent of the respondents favored a 25 percent or higher rate on corporations, which, according to one important measure, is more than twice the current effective rate.
Cutting Government vs. Cutting Specific Programs
Some misleading polls in recent years have concluded that the public prefers spending cuts over tax increases as the best method to decrease the deficit. The most recent example is an AP-GFK poll, which found that 56 percent of people prefer cutting government services, compared to just 31 percent who support tax increases.
As Citizens for Justice explained last year while examining a New York Times-CBS News poll, these questions are misleading because they ask about cutting “government services” more generally, rather than allowing the respondent to consider specific program spending cuts. When faced with a choice between vague service cuts and taxes, it’s not surprising that the public favors cutting spending because it’s not clear how they might lose out. Americans are famously wary of government spending, but ask them if they’re willing to cut, say, Medicare, the answer is a resounding ‘No!’.
When faced with specific choices, tax increases actually become one of the most popular ways to reduce the deficit. For example, a May 2011 Pew Research Poll which gave respondents a list of specific spending cuts and tax increases, found that two-thirds of the public favored raising income taxes on those making over $250,000 and raising the payroll tax cap, whereas nearly 60 percent opposed raising the Social Security retirement age and 73 percent opposed reducing funding to states for roads and education.
Next time you see news about a poll and it doesn’t sound right, it’s worth taking a look at the actual questions. The way they are worded makes the difference between good and bad polling.