Tax Confusion

 NPR recently administered a poll to American citizens. It tested their knowledge and opinion of the US tax system. The questions included:
  1. About what percent of working Americans have zero or negative income taxes?
  2. True or False: Lower-income people pay too much income tax.
  3. True or False: For the highest earners, the percent of federal income taxes they pay now is significantly higher than it was in 1980.
  4. The tax rate on income from work should be lower than the tax rate on income from wealth.
  5. True or False: 75 percent of the federal government’s revenue comes from personal income taxes.

As it turns out, there is significant confusion among taxpayers about the functioning of the US tax system. The most notable regarding the share of Americans who don't pay federal income taxes. Nearly 68% of Americans underestimated the percentage of Americans who pay zero or negative income taxes. In reality, 45% of Americans avoid income taxes, but many respondents approximated less than or equal to 27%.

In regard to the interaction between taxation and government revenue, Americans overestimated how important income taxes are to government revenue. Less than 75% of the government’s revenue is generated from income taxes, yet nearly half of respondents believed that 75% was the realistic percentage. Although federal income taxes are the largest contribution to government revenue, only 46.2% of total revenue is generated through income taxes, according to the Tax Policy Center.

Almost 67% of respondents believe lower income Americans face tax burdens that are too high. This exhibits a significant ideological stance given the belief that a great percentage of government programs are funded through individual, federal income taxes. Approximately 21% of Americans receive government assistance through tax-funded welfare programs like food stamps and Medicaid. More than half of the US population is considered low income and eligible to receive these benefits. By deduction, the survey responses indicate that a majority of the taxpayers polled believe that  lower income citizens should not be required to pay-in in taxes as much as they receive in welfare benefits. It is prudent, however, to keep in mind the liberal leanings of NPR and the possible bias that may be exhibited in the results of their survey.


Anna Graff

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