Tax Cuts, Tax Reform, and Public Opinion

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In this article, I discuss public opinion about the way President Obama and the two major political parties have handled tax issues and the extension of the Bush tax cuts. To shed light on the prospects for recent tax reform proposals, I also compare public opinion about the tax system today with public opinion in 1985 and 1986, during the debate that culminated in the enactment of the last major tax reform.

Recent polls show that people view taxes as important, but not as important as some other major issues. According to one new poll, almost half of the public approve of Obama's handling of tax policy. After gaining ground in 2009 and 2010 as the party that Americans trust more on handling taxes, the Republicans appear to have lost some support in recent polls.

Most polls conducted toward the end of the tax debate in 2010 found that about 15 percent of the public wanted the Bush tax cuts to expire for all taxpayers. The remainder of the population was divided about whether the tax cuts should be extended for all taxpayers or only for those with incomes less than $250,000, with somewhat greater support for the latter approach. Yet, the public ultimately gave strong support to the December 2010 agreement between the president and Congress that extended the tax cuts at all income levels, combined with an extension of unemployment benefits and other measures.

A comparison of public opinion today with public opinion in 1985 and 1986 suggests that the public may be less receptive to tax reform now than it was then. The public has less confidence in government and less intense dissatisfaction with the federal income tax. Nevertheless, the public does believe that the tax system needs to be changed, suggesting that reform proposals may find some support.

Obama, the Republicans, and Taxes

In late March the Associated Press released a poll that examined many different aspects of the Obama presidency. The AP/GfK Roper poll is one of only a handful of recent polls that have asked people to rate both the importance of the tax issue and to express approval or disapproval of the president's handling of it. Sixty-eight percent said taxes were extremely or very important to them, putting the issue in the middle of a list of 16 different items, far behind the economy, education, and unemployment (90, 86, and 82 percent, respectively). Unlike some other issues tested by the AP in the past two years, the level of concern about taxes has not changed significantly. In the new poll, 47 percent approved of the job the president was doing. When the AP first asked the question in April 2009, 54 percent did.

Every January since 2001, the Pew Research Center has asked people about priorities for the president and Congress. In 2011, 37 percent said ''simplifying the tax system'' should be a top priority for the president and Congress. Of the 22 issues Pew asked about, tax simplification ranked 18th. In Pew's January polling, disapproval of the president's handling of the issue outweighed approval 47 to 42 percent.

People appear to be more upset by how their tax money is used than by what they pay. An early April bipartisan poll for Fox News found that 52 percent of registered voters said they paid their fair share of taxes, while 43 percent said they paid more than their fair share, and 3 percent said they paid less than their fair share. Nearly half (49 percent) said their tax money was being spent less carefully than five years ago, while 34 percent said about the same amount of care was being taken with it.

Fourteen percent said it was being spent more carefully. The third tax question in the poll asked taxpayers to think about all the things the government

does and all the government services they use that are paid for with taxpayer dollars. Sixty percent said they were getting a bad deal for the taxes they paid, while 29 percent said they were getting a good deal.

Read Karlyn Bowman's related public opinion study on taxes from 1937 to today.

In part because of the predominant public concerns about unemployment and the economy, very few recent polls have asked or updated questions about which political party people prefer to deal with taxes. In my May 24, 2010, Tax Notes article, I wrote that after losing ground, the Republicans clawed back some of their public support to address taxes in 2009 and 2010. In a March 2011 AP/GfKRoper poll, however, 48 percent trusted Democrats to do a better job on handling taxes and 40 percent preferred Republicans. In the AP/Gfk-Roper October 2010 poll, the Republicans led by a few points-- 47 to 44 percent.

A poll conducted in late March and early April 2011 by NBC News and The Wall Street Journal paints a different picture. In it, the GOP has a two-point lead on taxes, with 32 percent preferring that party, but many people answered ''neither'' or ''both.'' In October, right before the GOP election surge, Republicans had a six-point advantage on the question.

Karlyn Bowman is a senior fellow at AEI.

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