WASHINGTON ― Most Americans think they are paying more federal taxes now than ever. That the tax code is riddled with loopholes that the rich use to avoid paying anything. That the government will take a big chunk of what Americans hope to leave to their children.
Most Americans, as it turns out, are really, really wrong – and their misconceptions are helping Republican leaders to push tax law changes that polls show Americans do not actually want.
Virtually every income group is paying lower taxes now than at any other time since Ronald Reagan became president. And while the tax code has plenty of deductions and credits, the most costly ones are those that middle-class taxpayers would be incensed if they lost.
And that inheritance tax? It only affects the richest Americans ― a tiny percentage of families every year.
“We’re a low-tax country, by the standards of other developed countries,” said Roberton Williams, a recently retired analyst at the non-partisan Tax Policy Center. That Americans believe what they do, though, is not surprising to him. “They’re continually told how taxes are too high,” he said. “It’s a continuing drumbeat.”
Now, President Donald Trump and Republican leaders are taking advantage of those erroneous beliefs while pushing a tax proposal that slashes taxes for the wealthiest Americans but gives only modest breaks for the middle class. As currently structured, the plan would actually be a tax increase for most Americans.
Despite this, House Speaker Paul Ryan (R-Wis.) has on numerous occasions described the plan as one that will give the middle class a well-deserved tax break. “The entire purpose of this is to lower middle-class taxes,” he told CBS News earlier this month.
Trump frequently praises the plan because it would allow returns to be done “on a single sheet of paper” by simplifying the code. “Our plan goes from eight tax brackets down to four,” he said at a speech in Harrisburg, Pennsylvania, last week.
Vice President Mike Pence, on a recent trip to Detroit and Milwaukee to sell the proposal, heard from an employee of a metal fabrication plant who said that even though his parents were not rich, he was worried the government would tax what they have managed to accumulate when they die. “Whatever they have built, it would be nice if they could pass it down,” he said.
That is a relatively common fear among Americans. Thirty-two percent, in fact, believe they are either “very likely” or “somewhat likely” to have to pay the estate tax, according to a YouGov poll commissioned by HuffPost ― even though the tax applies only to inheritances worth at least $5.5 million. Thirty-eight percent said they were unlikely to have to pay any estate tax, and 31 percent said they were unsure.
A subsequent survey found that 41 percent of Americans believe they personally are paying more in taxes than they were 10 years ago, and 52 percent believe the middle class is paying more than it was 10 years ago. Thirty-eight percent, meanwhile, believe the wealthy are paying less than they were a decade ago.
None of those impressions is accurate, however.
The middle fifth of taxpayers in terms of income paid 12.8 percent in federal taxes in 2013, the most recent year for which data is available, compared with 13.6 percent in 2003, 17.2 percent in 1993, and 17.5 percent in 1983 ― immediately after Reagan’s big first-term tax cuts, according to Congressional Budget Office figures.
That same trend is reflected across every income group, in fact, except the richest fifth of Americans, who saw their taxes rise from 23.8 percent in 1983 to 26.3 percent in 2013 ― and that was only because of tax increases under President Barack Obama following his re-election. That group’s tax rate had been 23.9 percent in 2012.
As for “loopholes” ― there are several dozen in the tax code, and they do total $1.2 trillion in lost tax revenue each year. But in reality, the 10 largest loopholes account for two-thirds of that value. And of those 10, all but two benefit middle- and lower-income families. The biggest “loophole,” for instance, worth $236 billion this year, allows employees who get health insurance through work not to pay any taxes on it. Another large one, worth $113 billion, lets homeowners enjoy the housing value of their dwellings tax-free – giving them a big advantage over landlords and tenants.
“Most people don’t realize they’re there,” Williams said. “[They don’t realize] that they’re getting a benefit that’s not being taxed.”
The earned income tax credit, worth $64 billion, only goes to lower-income Americans, while the child tax credit, which costs $54 billion, is unavailable to the wealthy. If these exclusions, deductions and credits were eliminated, middle- and lower-income families would see their tax bills rise substantially.
And the estate tax, thanks to changes passed as part of President George W. Bush’s tax cuts in the early 2000s, now only affects inheritances worth $5.5 million or more ― meaning it was highly unlikely that the factory worker who spoke to Pence needed to worry about it.
“When it’s called the death tax, it sounds really bad,” Williams said. “One in 500 deaths results in a tax. It’s obfuscation by repetition.”
During that visit to a metal shop in Waukesha, Wisconsin, Pence continued that repetition, employing the “death tax” phrasing that Republicans adopted decades ago after polls and focus groups found that its use made the estate tax less popular.
“Listen, the president’s tax cuts eliminate the death tax,” Pence told the Weldall employee concerned about his parents’ nest egg being taken by the estate tax. “We believe death should not be a taxable event.”
Even when making the case that the tax code is too complicated ― an argument that appears to naturally resonate with many taxpayers ― Republicans are using a sales pitch that glosses over the facts.
A full 68 percent of Americans, including 59 percent of Democrats, believe the tax system is too complicated, according to recent polling by HuffPost.
That’s the case even though the vast majority of taxpayers ― about 70 percent ― do not itemize deductions, and instead take the “standard deduction,” which this year will be $6,350 for single filers and $12,700 for married couples. What’s more, simply reducing the number of income brackets ― which Trump, Ryan and other proponents continue to boast about ― would not actually simplify taxes for anyone, particularly with more and more taxpayers using computer software that does the arithmetic for them.
Political consultant Doug Heye, a former communications director at the National Republican Committee, said he understands why the simplification argument strikes a chord.
“Number one: Look at our math scores,” he said, noting that even filing a single-page 1040EZ or a two-page 1040 requires understanding a detailed packet of instructions. “You’re handed a book. And you’re expected to figure it out? That’s not simple.”
The best advantage Republicans have, Heye said, is the fact that few people believe their taxes are being well spent. For that matter, few people are eager to pay taxes to begin with. “Anybody who files their taxes is upset by how much they have to pay,” he said.
Trump has certainly been relying on that for months. At a recent White House event marking Hispanic Heritage Month, Trump promised “the largest tax cuts in the history of the country” ― and then asked his audience if anyone objected.
“Does anybody in this room mind getting a massive tax cut?” he said.
The audience responded: “No!”
“Does anybody object to paying less taxes?” Trump asked, and then answered his own question. “I don’t see any hands.”
The two HuffPost/YouGov polls cited each consisted of 1,000 completed interviews, one conducted Sept. 29-Oct. 2 and the other conducted Oct. 13-14. Both were conducted among U.S. adults, using a sample selected from YouGov’s opt-in online panel to match the demographics and other characteristics of the adult U.S. population.
HuffPost has teamed up with YouGov to conduct daily opinion polls. You can learn more about this project and take part in YouGov’s nationally representative opinion polling. More details on the polls’ methodology are available here.
Most surveys report a margin of error that represents some, but not all, potential survey errors. YouGov’s reports include a model-based margin of error, which rests on a specific set of statistical assumptions about the selected sample rather than the standard methodology for random probability sampling. If these assumptions are wrong, the model-based margin of error may also be inaccurate. Click here for a more detailed explanation of the model-based margin of error.