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Tax Fairness: What Do People Think About It?

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I've been thinking about tax fairness in recent days, and was thus interested to peruse the Gallup results of the question. Nothing too surprising -- those who pay more in federal taxes think they're too high; almost nobody thinks their tax bill is too low. Stop the presses!

But departing from the data a bit, there are two factors that I suspect have an impact on our general perceptions of tax fairness. For one, there's our feelings about what we're getting for our tax dollar. In this regard, dysfunctional or ineffective government, from the shutdown to the health reform rollout, likely chips away at fairness perceptions. My readers know my take on this: those policy makers and their funders who would shrink government by slashing spending and choking off revenues benefit greatly from this dynamic. They have a strong incentive to pursue dysfunctionality.

Second, pretax wage stagnation for the many in a context of sharply rising incomes for the few could also contribute to a sense of unfairness in terms of taxation, even in a progressive system (and especially in one where wealthy corporations pay low effective rates).

Below, I've plotted the real median wage against Gallup's share of those who say the federal tax system is fair (I've lagged the fairness result by one year, so your feelings about tax fairness this year are influenced by your last year's real wage).

Now, do not take this too seriously. There are lots of lines that move like this and it would take a lot more work to see if this correlation means anything. But it's suggestive.

tax fairness

Source: Gallup, EPI (median wages)

This post originally appeared at Jared Bernstein's On The Economy blog.