The Phantom Tax Hike

by Larry Bartels on March 12, 2012 · 8 comments

in Blogs,Campaigns and elections,Political Economy,Public opinion

President Obama is paying a significant political price for having increased the tax burden on middle-class Americans. Fair enough—except that he hasn’t.

My latest Model Politics post focuses on disparities in perceptions of national conditions and their political implications. One of the questions in a recent YouGov survey asked whether “the tax burden on middle-class Americans has increased or decreased since Barack Obama became president?” That seems like a pretty straightforward factual question, but Americans’ answers are all over the map: more than 40% of the respondents said that taxes have increased under Obama, about 20% said that they have decreased, and almost 40% said that the tax burden has remained unchanged.

Regular Monkey Cage readers (for example, here, here, and here) will not be surprised to learn that these disparate perceptions reflect a good deal of partisan bias. More than 70% of Republicans said that the tax burden has increased since Obama became president, while fewer than 20% of Democrats agreed. But what is more striking—and more consequential politically—is that most Americans, regardless of party, are simply wrong about what has happened to the tax burden over the past three years.

The fact is that the tax burden on middle-class Americans has decreased during Obama’s presidency. More than one-third of the 2009 stimulus bill consisted of tax cuts, including expanded tax credits for workers, people with children, college students, homebuyers, and the unemployed. In 2010, Obama proposed and Congress accepted a substantial temporary reduction in the payroll tax, which was recently extended through 2012. Meanwhile, the Bush-era income tax cuts were also extended through 2012. While one might quibble about whether all of this amounts to decreasing the tax burden on middle-class Americans by “a little” or “a lot,” only 20% of the public gave either of those answers.

How consequential is the American public’s phantom tax hike? The following graph shows how support for Obama in a trial heat with Mitt Romney varies with perceptions of change in the middle-class tax burden during Obama’s time as president (ranging from -100 for “decreased a lot” to +100 for “increased a lot”). The relationship is shown separately for Democrats (including “leaners”), pure Independents, and Republicans. In each case, statistical controls are included for strength of partisan identification, political ideology, education, race, and sex.

The large dot along each line shows the average perception of the tax burden and support for Obama in the corresponding partisan group. Democrats are just to the left of the zero point, indicating that they were slightly more likely to say that the tax burden went down than that it went up. However, even they are well to the right of the -50 point on the horizontal axis, which would reflect a uniform perception that the tax burden had declined “a little.” Independents are even further to the right, on average, with Republicans still further to the right.

If Obama could convince everyone in the country that the tax burden on middle-class Americans has decreased just a little, his prospects for reelection would improve significantly. Even leaving aside the unlikely steep gain among Republicans implied by the figure, my analysis suggests that simply getting Democrats and Independents to appreciate that taxes are lower now than they were under President Bush would increase Obama’s vote share by about two percentage points.

Of course, it would be rash to count on that happening. Daniel Patrick Moynihan famously said,“Everyone is entitled to his own opinions, but not to his own facts.” But Americans rely on their own facts all the time, including in the voting booth.

{ 8 comments }

Adam March 12, 2012 at 9:13 pm

Fascinating finding, Dr. Bartels. I always appreciate your insights here.

I’m curious as to why you’re so confident about the causal order between perception of changes in the tax burden and Obama support. Granted, you controlled for both partisanship and strength of partisanship. But, given what we know about how voters project all sorts of things onto their preferred candidate, I still wonder if the effect runs the other way. Would the relationship still hold, for example, if we controlled for racial hostility, or some other measure that’s better able to tap the propensity of Obama haters to believe just about anything (see: Muslim).

bp March 13, 2012 at 10:34 am

I agree with Adam, especially since the question specifically mentions Obama. Seems like people less inclined to vote for Obama, even when controlling for PID, would rationalize their opposition by saying he increased taxes on the middle class.

Scott March 12, 2012 at 9:58 pm

It’s unsurprising that the public holds inaccurate beliefs about taxes, so where do these beliefs come from? I’m wondering if these beliefs about tax hikes really just reflect an individual’s attitude towards their own economic well-being. In other words, things are tough right now, so taxes seem worse. At the very least, it would be interesting to see the correlation with perceptions of the economy, and whether the reported results survive this control (of course, a survey experiment would be ideal).

Josh R. March 13, 2012 at 11:51 am

Very interesting, but one question: Is it problematic that the question does not distinguish between federal and state level tax burdens? In the text of both posts, the author writes:

“The fact is that the tax burden on middle-class Americans has decreased during Obama’s presidency. More than one-third of the 2009 stimulus bill consisted of tax cuts, including expanded tax credits for workers, people with children, college students, homebuyers, and the unemployed. In 2010, Obama proposed and Congress accepted a substantial temporary reduction in the payroll tax, which was recently extended through 2012. Meanwhile, the Bush-era income tax cuts were also extended through 2012. While one might quibble about whether all of this amounts to decreasing the tax burden on middle-class Americans by “a little” or “a lot,” only 20% of the public gave either of those answers.”

All those are, of course, federal policies and, therefore, it is eminently correct that federal tax burdens on the middle class decreased over this period of time. However, most states raised taxes in response to the Great Recession to fill budget shortfalls. When answering this question it seems likely that these tax increases are being included in the calculation’s respondents are performing. It might be interesting to look for state-level variation (or the absence thereof), comparing across states by degree of tax increase at the state level (zero, little, lot). It seems plausible that the partisan story would remain.

Matt_L March 14, 2012 at 12:30 pm

Exactly right. State and local taxes have gone up. Period. The Republicans ought to know, because they have raised them! Miraculously, they will also hang it around Obama’s neck.

Foster Boondoggle March 14, 2012 at 2:45 pm

What states have raised taxes? Is there evidence for this assertion? With the massive rightward swing of state legislatures in 2010, I think it’s safe to say that this is nonsense.

The reality is that most people have no clue what their taxes are or how they split between federal, state, local, SS and Medicare. They just know that the GOP has been repeating over & over that the Dems are a tax & spend party, so a substantial number believe it.

Josh R. March 14, 2012 at 3:55 pm

Pre-2010:

http://money.usnews.com/money/blogs/flowchart/2010/06/30/10-states-where-taxes-are-rising-the-most

“Over the last two years, 36 out of 50 states have raised taxes or fees, according to data from the National Association of State Budget Officers. The combined tab comes to more than $25 billion. The worst seems to be over, with proposals for the upcoming year amounting to just $3.1 billion in new state taxes.”

A more recent National Association of State Budget Officers notes that 2012 saw decreases for the first time since 2007, although not in all states:

http://www.nasbo.org/sites/default/files/Fall%202011%20Fiscal%20Survey%20-%20Summary.pdf
[sorry for some of the textual choppiness, it's a direct copy from the .pdf]

“States Enact First Net Tax and Fee Decrease Since 2007
State enacted  fiscal 2012 budgets include a $584 million reduction in new net taxes and fees. Specifically, 18 states enacted net decreases in taxes while 13 states enacted net increases. Th is is the first net reduction in new taxes and fees since  fiscal 2007. In addition to the net reduc-tion in new taxes and fees, states also enacted decreases of almost $2.6 billion in net revenue measures. Revenue measures differ from taxes and fees in that they enhance general fund rev-enue, but do not affect taxpayer liability and may rely on enforcement of existing laws, ad-ditional audits and compliance e orts, and in-creasing  fines or late  filings. Many of the larger state decreases in both new taxes and fees and new revenue measures are the result of expiring tax provisions that were not renewed. In response to the significant loss of revenue dur-ing the recession, states enacted $23.9 billion in increased taxes and fees along with an addi-tional increase of nearly $7.5 billion in revenue measures in  scal 2010 as well as $6.2 billion in new tax taxes and fees and $2.9 billion in rev-enue measures in  scal 2011. ”

So, you are correct that there has been a movement away, at the state level, from taxes since 2010, although this has not touched the majority of states (18 decreases out of 50 states). Also, I’m unclear on this, but it seems that that data is at the state level only, e.g. it would not include tax increases/decreases at the municipal/city level, further muddying the water.

glenn March 13, 2012 at 6:54 pm

I think Adam has it right. The arrow of causation probably runs from I don’t like Obama to he raised my taxes, than the other way around. At least that is true with my relatives.

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