90% of Americans Say Tax Investment Income More & 71% Prefer Clinton’s Tax Plan to Trump’s via WalletHub
Tax policy is an ever-changing landscape. As such, questions of fairness regularly find their way to the forefront of politics and public discourse. Who should pay for what and how much are among the questions that everyday Americans grapple with while struggling to navigate an increasingly complex tax code.
And the challenge trickles down to the process of choosing a leader to represent their ideas of fairness. That issue is now in the hands of Hillary Clinton and Donald Trump, who over the course of their campaigns have proposed very different plans for tax reform. In brief, Clinton wants to raise taxes on the wealthiest Americans, whereas Trump claims he will cut marginal taxes on both ordinary taxpayers and businesses.
With the 2016 presidential election ahead of us, the time seemed appropriate to learn what Americans think of the current U.S. tax system, how to improve it and whether their ideas align with Clinton’s or Trump’s plans. To investigate Americans’ attitudes toward taxation, WalletHub’s analysts conducted an online survey of a nationally representative sample of 1,040 Americans. Continue reading below for our detailed findings, expert commentary and a full description of our methodology.
- More than 75 percent of respondents rated the current tax code as either “complex” or “extremely complex.”
- Nearly half of respondents (47.8 percent) said the fairest possible tax code would have fewer deductions than currently available.
- Nine out of 10 respondents said income from investments should be taxed at least as much as wages.
- More than half (57.09 percent) said wages and investment income should be taxed equally, while a third (33.01 percent) said investment income should be taxed more than wages.
- One in four respondents (26.27%) support a flat income tax.
- Nearly three-fifths of respondents (57.18 percent) said corporations should face higher tax rates than consumers.
- Americans view taxes on wages and corporations as “least fair” and taxes on alcohol and tobacco as “most fair.”
- More than half of Americans (56.74 percent) view tax fairness as more important than whatever is best for the economy (22.63 percent) and tax equality (20.63 percent).
- Overall, 71 percent of Americans prefer Clinton’s tax plan over Trump’s (29 percent).
Tax Rates by Income Group
Our current federal tax system has a “progressive” structure, in which higher incomes are taxed at higher rates. Central to the tax debate is how income tax should be structured: Should everyone pay the same tax rate? How much more tax should the wealthy pay relative to the middle class? Should the poorest Americans pay any income tax?
To determine what Americans consider fairest income-tax system, we presented respondents with the following four charts of income-tax rates by income and asked them to choose the one they considered “fairest”:
- One quarter of the respondents (26.27%) said they prefer a flat income tax, compared with almost three-quarters preferring one of the more progressive options.
- Notable again is the difference between men and women in preferences for a flat tax. Men (30 percent) are more likely than women (23 percent) to prefer a flat tax. This difference between men and women holds in a multivariate model: Net of age, income and region of the country, men show 65 percent higher odds than women of preferring a flat-tax option (relative to the other options).
- Interestingly, the most popular choice, chart C, includes some taxation of poor households. It is hard to determine, however, which features of the tax systems depicted in the charts are driving support for this attitude. We plan to further investigate this issue in future WalletHub studies.
- Respondents were provided an opportunity to describe in words what they consider a “fair” tax code. The quote bubble to the left captures some of the most common words and phrases from their responses.
We first asked respondents how complex they would rate the current U.S. tax code:
How would you rate the complexity of the U.S. tax code?
- When asked how complex they found the current tax code, more than 75 percent responded that it is either “complex” or “extremely complex,” compared with only 5.5 percent of who responded that it is either “simple” or “very simple.”
- In a multivariate regression framework, age appears to be positively associated with viewing the current tax code as “too complex” — that is, the older the respondent, the more complex he or she regards the current tax code. This is net of differences by income, sex and region of the country.
Our current tax system is made complex by, among others, the number of deductions. We therefore asked respondents whether the fairest possible tax code would have more, less or the same amount of deductions, relative to current provisions.
- About one in four respondents said the fairest tax code includes more deductions.
The fairest possible tax code would have ______ potential deductions, relative to the current U.S. tax code.
|The same amount of||25.34%|
- Descriptively, older participants are generally more likely than younger ones to respond that the fairest tax code includes fewer deductions.
- Men (26 percent) are more likely than women (22 percent) to respond that the fairest tax code includes fewer deductions. This difference between men and women is statistically significant in multivariate models controlling for income, age, and region of the country.
Investment & Wage Income
How to tax income from investments relative to wages has been a major area of disagreement among politicians. Current policy taxes income from investments at a lower rate than income from wages, which results in a prominent investor like Warren Buffet paying a lower effective tax rate than his secretary.
We asked respondents what they consider the fairest possible relationship between tax rates on investment income and wages. Should tax rates be higher on wages or investment income? Or should the tax rates be the same for both?
Which of the following options describes the fairest possible relationship between tax rates on investment income and wages?
|Higher Tax Rates for Wages||9.9%|
|Higher Tax Rates for Investment Income||33.01%|
|Equal Tax Rates||57.09%|
- More than 90 percent of respondents said income from investments should be taxed at least as much as income from wages.
- Notably, no significant differences by income or age are present. Across all groups, there appears to be strong support for higher taxes on investment income, relative to current policy.
Consumers vs. Corporations
Graduated income-tax rates aren’t the only way to make the tax code fairer. Respondents also said corporations should face a higher tax rate than consumers:
Which of the following options describes the fairest possible relationship between corporate and consumer tax rates?
|Higher Tax Rates for Corporations||57.18%|
|Higher Tax Rates for Consumers||6.24%|
|Equal Tax Rates||36.59%|
- Yet again, women and men show stark differences in opinion, with women (65 percent) significantly more likely than men (49 percent) to say that higher