Posts Tagged ‘Taxes’

O’Reilly and Taxes

Posted: July 13, 2011 in Taxes
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In the below video, Bill O’Reilly argues something along the lines of the following:

  1. Because tax revenues as a percentage of GDP are at post-WWII lows, we need more revenue.
  2. To obtain more tax revenue, we need to raise taxes in ways that will not harm the economy.
  3. Raising the federal income tax will harm the economy.
  4. Implementing 1% federal sales tax will not harm the economy.
  5. We should implement a federal sales tax (at least over a federal income tax).

Two questions for Bill:

If the whole [tax debate] thing is class warfare, what does that mean for a flat sales tax?

What is your vision for the size and role of government?

Bruce Bartlett over at Capital Gains and Games attempts to show that public opinion polls indicate that people want to raise taxes to shrink our federal budget deficit.  He writes:

Contrary to Republican dogma, polls show that the American people strongly support higher taxes to reduce the deficit and improve income inequality. Following are eighteen different polls since the first of the year that say so.

Many individuals often appeal to this sort of “argument en masse”: Not only am I right, but I’m right eighteen times!  Yet sometimes quality trumps quantity.  Sure, scientific study is largely based upon the ability to replicate results under different circumstances.  Yet many of the eighteen polls indicating favorable public attitudes towards tax increases, the text of which I will generally spare you and can be found here, don’t really seem to support Bartlett’s conclusion.

For example, one of the polls provides respondents the option of increasing taxes on the rich versus cutting Medicare or Social Security.  The big problem: the poll fails to distinguish between cutting some expenditures (or for that matter presenting such cuts as specific program cuts) and ending the entire program.  It is not surprising that many people would rather raise taxes than end Social Security.  However, many people would probably accept some smaller cuts in Social Security rather than raise taxes.

Another poll discovers the following:

Forty-nine percent expect that the government will have to cut programs that benefit them in order to lower the deficit, while nearly as many — 41 percent — think that won’t be necessary…[Additionally,] just 37 percent, expect it will be necessary to increase taxes on people like themselves.

This doesn’t seem to help us much either.  It is fairly commonly accepted that individuals simply don’t know the extent to which they benefit from government programs,largely because they are not aware of the hidden welfare state and in part because they simply don’t understand the redistributive nature of programs such as Medicare and Social Security.

One more poll shows that most people prefer a combination of tax increases and spending cuts to address the budget deficit over cuts alone.  However, Bartlett’s point is weakened because the same poll shows that people drastically prefer cutting spending alone to raising taxes alone.  Admittedly, this is not in itself meaningful if Democrats choose to accept some significant spending cuts.   But wait, there’s more: it also shows that people who chose the “combination” preference tended to support cutting existing programs more than raising taxes if they had to choose one or the other. Most damningly, when the “combination” preference was split into those who favored a more cut-intensive resolution and those who supported a more tax-intensive resolution, cutting existing programs alone was preferential to both options.

Of additional interest is the fact that the second-most preferred option in this split was a combination of cuts and spending, with a focus on cuts.  I would put my money on the tax-heavy combination supporters assuming the taxes are aimed at the extremely wealthy and not themselves.  An additional question that asks these questions while shifting the tax burden between income quintiles would surely change the poll preferences immensely.

Bartlett throws out some polls which seem more convincing than these mentioned polls.  Yet it is misleading to say “Americans want higher taxes.”  It could be more accurate to say that “Americans want mostly spending cuts with some taxes which fall on rich individuals other than themselves.”  Most polls seem to indicate that people mostly want spending cuts, although very few people seem to want to cut the big drivers of our deficit.