Read My Lips: Why Americans Are Proud to Pay Taxes

READ MY LIPS

READ MY LIPS

WHY AMERICANS

ARE PROUD

TO PAY TAXES

Vanessa S. Williamson

Princeton University Press

Princeton & Oxford

Copyright © 2017 by Princeton University Press

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CONTENTS

ILLUSTRATIONS

PREFACE

The Tax Revolt Was a Long Time Ago

When I tell people I study Americans’ opinions about taxation, their reactions are predictable. First, a pained look usually passes across the face of my interlocutor, as he or she regrets asking me about my presumably dreary work. Second, he or she informs me that Americans hate taxes. Americans are angry, I’m told, or selfish, or shortsighted, or prefer to be self-sufficient and are therefore intrinsically anti-government. For one reason or another, Americans just do not want to pay the government’s bills.

This popular vision of Americans as anti-tax ideologues surely draws some of its power from the media. On Fox News, conservative pollster Frank Luntz told Bill O’Reilly that taxes are an emotional issue for the voters because nobody wants their taxes to go up. Journalist Maria Bartiromo, hosting a 2015 Republican presidential primary debate, insisted there isn’t anyone in this audience or watching at home tonight who would not like to pay less in taxes. Perhaps surprisingly, this vision of the American public is common on the political left as well. On CNN’s Crossfire, Bill Press—the host representing the liberal viewpoint—opened the 1997 Tax Day show by saying, It’s April 15, the one day all Americans agree on something—we all hate paying taxes. On MSNBC, left-wing commentator Ed Schultz affirmed in 2011 that there’s no doubt Americans hate taxes. The idea is so entrenched that it is used to frame even contradictory evidence. In 2003 journalist Bill Schneider began a discussion on low support for tax cuts by saying, Americans hate taxes. The country was founded on that, and it’s held steady for so long it seems like a fact of political life in this country. Confronted by survey evidence that some Americans like filing their income taxes, Lou Dobbs asked rhetorically, Who in their right mind loves paying taxes? They probably work for the IRS, for crying out loud.¹

As in the popular press, public opinion polls commonly assume that the only attitude Americans hold about taxes is one of enraged opposition. For instance, Gallup regularly asks, Which of the following bothers you most about taxes? and Which do you think is the worst tax—that is, the least fair? For good reason, most survey questions are not asked this way; negative questions carry a value judgment and predispose certain answers. And these questions collect only half the range of possible views. Asking people what is most bothersome about taxes ignores the possibility that they are not bothered. That the income tax is often chosen as the worst tax has very different implications when one learns, as I did in the course of my research, that it is equally commonly picked as the best tax. And yet tax questions are persistently asked in the negative.

The idea that Americans hate taxes has become a truism without the benefit of being true. Instead, Americans see paying taxes as a civic obligation and a political act. To be a taxpayer, Americans believe, is something to be proud of. It is evidence that one is a responsible, contributing, and upstanding member of society, a person worthy of respect in the community and representation in the government.

My work on taxes builds on a substantial body of scholar-ship that has looked at attitudes about public spending, and gives lie to the notion that Americans are knee-jerk opponents of government. Dating back at least to the work of the path-breaking social scientists Lloyd Free and Hadley Cantril in the late 1960s, scholars of public opinion have recognized that, though Americans tend to agree in principle with small government, they simultaneously approve of major public investments in economic opportunity.² Forty years later, political scientists Benjamin Page and Lawrence Jacobs reviewed decades of survey data to conclude that a majority of Americans, including a majority of Republicans and the affluent, not only favor concrete government programs targeted to jobs and wages, educational opportunity, and protections against illness and deprivation but would even be willing to pay higher taxes to fund these efforts.³

In the face of so much contradictory evidence, how can we explain the longevity of the popular conviction that Americans hate taxes? It is hard to say with certainty, but one event within living memory seems to have played an outsized role in the consciousness of politicians, journalists, scholars, and perhaps the public as well—the tax revolt.

The year was 1978. All spring, the Bee Gees, and their little brother Andy Gibb, had been dominating the Billboard Hot 100. Fans of Saturday Night Fever were eagerly awaiting the release of John Travolta’s next movie, Grease. And in California, voters passed a ballot measure called Proposition 13, which slashed property taxes and instituted a property tax cap that would dramatically limit state funding for more than a generation.⁴

Similar measures were soon on the agenda in states across the country, in what came to be known as the tax revolt. The tax revolt shocked elites at the time and, only a few years later, was seen as the harbinger of the end of the New Deal consensus and the dawn of Reagan-era welfare state retrenchment.⁵ For years, the tax revolt has remained a powerful political memory.⁶ For scholars, too, the tax revolt became a touchstone. Much of the best research on tax attitudes dates to that era, as scholars attempted to understand what appeared to be a fundamental reorientation of American politics.

The origins of the tax revolt in California were not a popular clamoring for the Reagan Revolution, but instead a demand for government protection against housing market vagaries—what amounts to a social program delivered via the tax code.⁷ Nonetheless, Proposition 13 changed the political calculus of the two parties. Until the 1970s, tax policy was not a major component of either party’s political platform.⁸ After the tax revolt, tax opposition would come to be the sine qua non of Republicanism, from Grover Norquist’s anti-tax pledge to the Tea Party movement.⁹ In the face of this staunch opposition, the Democrats failed to develop a unified message on taxation.¹⁰

While anti-tax activism has, to an important degree, defined national political debates since the 1980s, these mobilizations do not accurately represent the opinions of most Americans today. The Tea Party movement, at its height in 2010, had perhaps 200,000 active participants.¹¹ The prominence of the tax revolt and the persistence of tax opposition as a rallying principle of the Republican Party disguise fundamental changes in American tax politics.

That times have changed is evident on the home field of the tax revolt, the state ballot measure. Over the past three and a half decades, state ballot measures intended to raise taxes have steadily had more success (figure 0.1). In the late 1970s and early 1980s, about one in five of these measures passed muster with the voters. In the past ten years, voters have approved half of the sixty-two tax-increasing measures that have appeared on state ballots. Today, voters are as likely as not to vote for a state tax increase.¹²

Moreover, many different kinds of taxes have been successfully increased by popular vote. The list of successful tax increases includes both measures targeted at the wealthy and broad-based taxes affecting nearly all state residents. And these measures are not just raising small change, either. In 2010 voters in Oregon raised their top income tax rates and their corporate minimum tax, while voters in Arizona raised the sales tax. Each bill was worth hundreds of millions of dollars annually.

Meanwhile, measures to cut taxes have dwindled in their significance. In stark contrast to sweeping measures like Proposition 13, tax cut ballot measures are now often what you might call Grandma and Apple Pie measures: legislation that offers a small additional property tax credit to seniors, military veterans, the disabled, and their surviving spouses. In Colorado in 2006 a measure appeared on the ballot to reduce the property taxes paid by veterans rated as 100% disabled due to their military service. The state estimated the measure would affect a little over two thousand people, and would save each veteran perhaps as much as $500. The voters were very willing to be generous to such worthy beneficiaries; nearly four in five Colorado voters voted in favor of the 2006 measure, a tiny cost to the state that might slightly ease the finances of a few of the state’s wounded warriors.

FIGURE 0.1. The Success of Tax-Increasing State Ballot Measures, 1977–2014

Note: Dot size is relative to the number of measures in a two-year period. Dotted line is a simple line of best fit. (OLS, or ordinary least squares, is a mathematical calculation that fits a line through a scatter of data to highlight the overall pattern. One way to visualize this process would be to draw a vertical line from each dot to the line, and imagine how tilting the line would change those distances. Technically speaking, OLS finds the line that minimizes the sum of the squares of those vertical distances.)

But here’s the shocking news. Putting aside these Grandma and Apple Pie measures that get landslide approval from the voters, tax cuts barely outperform tax increases at the ballot box any more. If there’s a tax revolt going on in America today, it is not coming from the voters.

Though ballot measures have been shown to follow broad trends in public opinion,¹³ many different fiscal, economic, social, and political factors influence initiative and referendum campaigns. And, of course, not everyone votes. So votes for tax increases are not proof that public opinion as a whole has shifted. But the tax revolt was a long time ago. Particularly given how much tax voting has changed, this point of reference from nearly forty years ago is surely not the best way to understand how Americans think about taxes today. It is high time to reexamine contemporary American tax attitudes.

ACKNOWLEDGMENTS

The idea for this book grew out of an earlier project on the Obama-era conservative movement known as the Tea Party. In talking with Tea Party activists, I was struck by how central being a taxpayer was to their identity: a point of honor and distinction even as they railed against what they believed their tax money was buying. I also realized that the most ardent conservative voices on taxation were the only ones that were getting much attention. I wanted to understand this apparent paradox of pride and anger in taxpaying and to look more broadly at how most Americans think about taxes. I am grateful to the many people who helped me transform those first questions into a research agenda, a dissertation, and eventually this book.

I have been very lucky to benefit from a strong academic community. Theda Skocpol has been an inspiration, a mentor, a brilliant critic, and an excellent travel companion; I am profoundly grateful for her scholarship and her friendship. To Andrea Campbell, my deep appreciation for her expertise on taxation, her unfailing insight, and her words of encouragement. My sincere thanks to Dan Carpenter for his incisive reading of my dissertation and for his practical advice and exceptional support as I have navigated academia and publishing. I am also grateful to the field of fiscal sociology, which is thriving in large part due to the work of Isaac Martin, Ajay Mehrotra, and Monica Prasad. Jennifer Hochschild and Heather Marrow taught me a great deal about how to conduct qualitative research and how to present its results. Immense thanks also to my colleagues in graduate school who were willing to read (and reread) drafts of this work: Alyssa Battistoni, Charlotte Cavaille, Katie Einstein, Shelby Grossman, Alex Hertel-Fernandez, Carly Knight, Jen Page, Jen Pan, Beth Pearson, Amanda Pinkston, Ethan Porter, Molly Roberts, Chiara Superti, and Kris-Stella Trump.

The book has also been much improved by my colleagues in the world of public policy. At the Brookings Institution, thank you to Darrell West and Bob Brier for reading the manuscript, and to Bill Gale and all my new colleagues at the Tax Policy Center, whose data I have been relying on for years and whose recent feedback on my research has been invaluable. Also, a note for anybody who wonders why their book is not done: it is probably because the extraordinary Curtlyn Kramer is not your research assistant.

The central argument of this book came together during a residency at the Blue Mountain Center, an inspiring community of writers, artists, and activists. My research would not have been possible without the emergency assistance of the formidable Claire Sandberg. (When she is not moonlighting as an interview coder, Claire is rewriting the rules of political mobilization; her work deserves its own book.) Thanks also to my interview transcribers: Melissa, Elizabeth, and Nancy. Christopher Mitchell provided very useful feedback on the introduction.

I would also like to express my appreciation of my editor, Eric Crahan, at Princeton University Press, for his unerring advice and for his faith in this project. Thanks also to the anonymous reviewers, whose critiques vitally strengthened my argument and immeasurably improved the manuscript.

My work has received financial support for which I am most grateful. First and foremost, my sincere thanks to the American taxpayers. My academic career rests on the foundation I received in the excellent public schools of New York City and Sacramento, California. In addition, my graduate education was funded in part by the National Science Foundation. Thanks also to the Washington Center for Equitable Growth; Harvard’s Institute for Global Law and Policy, Center for American Political Studies, and Inequality and Social Policy Program; and the Tobin Project.

I am indebted to my interviewees and survey respondents who shared their time and their thoughts. In particular, I thank Alexa, who surely does not recall an email she sent me following our interview:

Please do let me know if you have anything else to run by me (free of charge ;)). I feel like I accomplished more in having my voice heard through you than through any elected official! Ha.

I found the generosity and the pessimism of this off-hand remark highly motivating, and I hope this work succeeds in accurately presenting the voices of the American tax-payers I surveyed and interviewed. I also thank Matthew, who emailed me from a military base in Afghanistan more than a year after our interview to check how the project was going. (Matthew: I cannot really explain what took so long, but I am glad to report the book is done.)

Finally, thanks to my family. To my parents, Liz and Arthur Williamson: you were my first readers and are still my target audience. I am also very grateful to Betsy and Douglas Johnson for their comments; it is a rare set of in-laws that one trusts with one’s book manuscript. Above all, thank you to my husband, Bradford Johnson, who has the sharpest political mind and warmest political heart of anyone I’ve ever known. This book is dedicated to our son, Storry. May our taxes build a brighter future for your generation.

READ MY LIPS

INTRODUCTION

All accumulation … of personal property, beyond what a man’s own hands produce, is derived to him by living in society; and he owes on every principle of justice, of gratitude, and of civilization, a part of that accumulation back again to society from whence the whole came.

—American revolutionary Thomas Paine, 1797

Woman now holds a vast amount of the property in the country, and pays her full proportion of taxes, revenue included. On what principle, then, do you deny her representation?

—National Women’s Rights Convention, 1866

Since the founding of the country, Americans have talked about taxes as a debt owed to one’s fellow countrymen.¹ As Thomas Paine argued, the whole of one’s livelihood, beyond the meager life an individual could secure in a state of nature, is due to the society in which one lives. Taxes are how one pays one’s community back for making a civilized life possible, he argued. The sentiment was echoed a century later by Supreme Court Justice Oliver Wendell Holmes, Jr., who wrote, [T]axes are what we pay for civilized society.²

But responsibility does not run only from taxpayer to community; taxpayers also make claims upon government. Like the National Women’s Rights Convention, those seeking greater representation have often situated their demands in terms of being taxpayers. To contribute to public coffers means one should be consulted on public affairs, they argued. Taxpaying is seen as evidence of one’s worthiness for citizenship. It is an idea consecrated most famously in the United States in the Revolutionary-era slogan no taxation without representation.³ To use the language of political theorist Judith Shklar,⁴ taxpaying is an emblem of public standing, proof of one’s virtue and entitlement to political power.

In the contemporary era, debates about who deserves to be American are still couched in the rhetoric of who pays taxes. Immigration reformers have campaigned under the slogan Viva Taxes! to highlight the eagerness of unauthorized immigrants to pay their share, and, by implication, their worthiness for legal residency.⁵ In the lead-up to the 2016 election, Republican Donald Trump and Democrat Hillary Clinton both discussed the status of immigrants in terms of taxes. Our undocumented workers in New York pay more in taxes than some of the biggest corporations, said Clinton, arguing for a path to citizenship for these immigrants.⁶ A few months later, Donald Trump justified the cost of mass deportation of more than eleven million undocumented residents, along with other draconian immigration policies, by saying that these immigrants are here illegally. They are not paying taxes.⁷ Throughout American history, taxpaying has been a symbolic battlefield on which political elites have fought to define the limits of citizenship.

It is not only America’s leaders who treat the paying of taxes as a responsibility owed to society and evidence that one has a right to participate in the political system. This is also, as I will demonstrate over the following chapters, how most Americans today think about what it means to pay taxes. Behind the forms and the tables, the technical jargon of marginal rates and tax incidence, the act of taxpaying taps into Americans’ fundamental political values: their sense of fellowship with other people and their feelings of representation by the government. Americans treat taxpaying as a civic commitment, an act that helps define their ties to the community and the country.

Because they see taxpaying as an important civic duty, Americans express outrage when they perceive others as failing to live up to this political obligation. Asked what bothers you most about taxes, 67 percent of Americans say the feeling that some—either the rich, the poor, or corporations—are not paying their share. A mere 8 percent of Americans are bothered most by the amount of money they themselves pay.⁸ It is not that most Americans mind chipping in to pay for public investments. Instead they worry that other people are not doing their part.

The tax system is complicated, however, and it is hard for an individual to gauge whether others are paying their share. Listening to the news only encourages these doubts. The Wall Street Journal has famously excoriated a supposed non-taxpaying class, those lucky duckies too poor to owe federal income taxes.⁹ And reports of corporate tax avoidance regularly make the rounds; The World’s Favorite New Tax Haven Is the United States reads a Bloomberg News headline, while Forbes reports on 26 CEOs Who Made More Than Their Companies Paid in Federal Tax.¹⁰ Based on articles like these, it is easy to imagine that neither the rich nor the poor are paying much in taxes.

The message that many people are cheating the tax system falls on fertile ground in part because it jibes with