Our guest blogger is Seth Hanlon, Director of Fiscal Reform at the Center for American Progress Action Fund.
An article in The Hill today describing the results of a new poll inaccurately reports that voters want “a lower tax bill” for wealthy individuals and businesses. If anything, the poll shows the opposite.
In tax policy, it’s critical to distinguish between marginal tax rates and effective tax rates. Marginal rates are the rate paid on a person or corporation’s last dollar of income. Effective rates are the overall share of income paid in taxes.
Effective tax rates are the better measure of what taxpayers actually pay: They take into account the numerous tax breaks that individuals and corporations use to lower their tax bills, and the fact that people in top tax brackets have income in lower tax brackets.
The Hill article fails to sort out this very basic distinction, then proceeds to make a number of apples-to-oranges comparisons that paint a misleading picture of what wealthy people and corporations are paying in taxes now and what people want them to pay. For example:
– The article’s lede asserts that, “three-quarters of likely voters believe the nation’s top earners should pay lower, not higher, tax rates.” That’s not what the poll reveals. The poll apparently asked respondents to identify the “most appropriate top tax rate” for families earning more than $250,000, a vague formulation that is very likely to prompt most respondents to say how much of their income these families should pay in taxes — in other words, what their effective rate should be. Fully 60 percent of respondents who expressed an opinion said that the “most appropriate” rate for families earning $250,000 or more should be 25 percent or higher. That is, in fact, higher than what the average effective income tax rates are today for all levels of income. And it is significantly higher than many extremely wealthy households now pay. Read more