Intro. [Recording date: March 16, 2017.]
Russ Roberts: ... Vanessa Williamson is the author of Read My Lips: Why Americans Are Proud to Pay Taxes, which our topic for today's conversation.... Your book is about the attitudes of Americans toward taxes and government spending. And before we get into what you found, tell us a little more about where the numbers come from. You did a survey, as well as a set of interviews. So, give us some of that background, please.
Vanessa Williamson: Yeah. So, I was looking at survey data about taxation, and, you know, there's a lot of surveys out there. So, some of the information comes from other people's surveys. But there were some serious gaps, too. And so I also conducted my own survey of 1000 U.S. adults. And I did interviews with an additional 49 people to fill in--to understand really how they think in addition to what they think, and so to see how their train of thought worked when they are thinking about different parts of the tax code, because obviously it's very complicated and we don't really have a total picture of, you know, what most Americans even understand about the taxes they pay. So I wanted to get more grounding.
Russ Roberts: What I like about the interviews--of course, it's just 49--it's not an incredible cross-section of the American people--but it allowed you to go deeper into people's attitudes rather than just checking off a number from 1 to 5 or giving a blunt response in a multiple choice question.
Vanessa Williamson: Exactly. So, one of the things I wanted in the book was make it have sort of people in it that you could remember from "to quote," [literally in audio: 'from quote to quote'--Econlib Ed.] so that it wasn't just a bunch of anonymized, you know, random opinions sort of aggregated together. You actually got a sense of actual human beings through the book. And so I think, and that's one of the things that interviews really provide.
Russ Roberts: So, let's talk about the point in your subtitle. You say that Americans are proud to pay taxes. That will surprise some people. Elaborate on that.
Vanessa Williamson: Absolutely. So, one thing that I noticed--my previous book was about the Tea Party, right? So these are some folks who are very angry about what they thought government was doing. But it struck me--you know, when I was at Tea Party rallies or at meetings, people referred to themselves as taxpayers--you know, 'As a taxpayer, I--something.' And what was interesting was, the end of the sentence was never really about taxes. It was always sort of a frame that they used to express their right to have an opinion or that they deserved to be heard. And so I was interested by that. These people who were very angry about government were nonetheless locating themselves as taxpayers. And so, I thought it would be interesting to find out what other Americans thought about that question. And also, what you tend to hear a little bit more from the extremes of the political spectrum. And so, I was curious about what folks in the middle had to say. And so what I found is--and this is true across all kinds of survey data: Americans have a very strong civic commitment to taxpaying. You know, if you ask people whether it's their civic duty to pay their fair share, then like 95% of Americans agree with that statement. That is an overwhelming majority. By way of comparison, when 5% of Americans say something, it's usually something like that they don't believe the moon landing existed. You know. Or that Elvis is still alive. So, 95% agreement in America is an exceptional number. And you find, you know, across a lot of survey questions very high percentages of people agreeing that it's wrong to hold back on your taxes or that you have a responsibility to do your part; even a moral responsibility to do your part and pay your taxes. And what's interesting is that carries over into tax compliance. Tax compliance in the United States is very high by international standards. And economists often describe that compliance as having to do with our tax morale--that is to say, our sense that this is our shared responsibility and we all have to chip in.
Russ Roberts: Yeah. I was--that was fascinating, the different--I would say it's a sense of identity for a lot of people, that claim, 'As a taxpayer, I--filling in that blank.' What do you think is the source of those emotions? Of pride and responsibility as well? And not just for themselves but for others?
Vanessa Williamson: Well, I think it's a very human feeling to want to feel that you contribute. Right? There's all kinds of studies showing that, as people get older, one of the things that keeps them healthy is the belief that they are still contributing--that they are useful. It's a very human feeling. And one thing that I think people can feel about their taxes is that, 'Here is evidence of me doing my part.' Now, I might not be happy about where the money is going. Or, I might be very unhappy--and this is the most common thing for people to be unhappy about with taxes--is the idea that other people aren't chipping in. Right? So, 'I'm the one doing my part but other people aren't doing their part?' But, nonetheless, that feeling of, you know, 'I'm an adult. I'm a contributing person. I do my bit. I'm an upstanding citizen'--that's something that really appeals to people.
Russ Roberts: And, one of the things that your book talks a lot about, and I found extremely interesting, was the misperceptions people have about who pays what and how much. And, of course, I'm aware that people are not fully aware. We all know that. But, the degree to which they are not aware, and why those misperceptions persist was extremely interesting. And in particular, you write that people misperceive both what the poor and the rich pay in taxes. So, let's start with the poor. A lot of people in your results make the point that the poor "pay no taxes." So, talk about what's correct and incorrect about that, and how that affects people's attitudes.
Vanessa Williamson: Absolutely. So, one thing that misguides Americans about how much people pay in taxes is the details of the taxpaying process. Now, the income tax is very salient. It's at the front of almost everyone's mind. Even when it's not a particularly expensive tax to them, personally. Because it's a hassle. Right? Every year you have to think about it; people are probably thinking about it right about now, actually, this year. And even if at the end of the day the cost is small, it's the hassle is high. People tend to get a little confused. Right? And so they sort of confuse hassle with cost. And over-estimate how much the income tax costs them. Now, the income tax, of course, is a progressive tax that falls more heavily on wealthy people than poorer people, at least until you get to the very, very, very incomes. And so, uh, people sometimes focus so completely on the income tax that they neglect to think about the many other kinds of taxes, which fall quite heavily on lower-income people. So, one question I asked survey respondents is: Which is the most expensive tax for their household? The biggest tax they pay? And, you know, people who--for--and then because we are a third demographic and economic information, I tried to calculate their taxes. Right? And I found that people, generally speaking knew the biggest tax they paid. But they--when people forgot the taxes that they paid, it tended to be the ones that are easy to pay. Right? So, many, many, many people forgot almost entirely about the payroll tax. Right? Which pays for Social Security and Medicare. And everyone chips in on that if you are working. Or, alternatively, middle income people tended to forget about the sales tax--because they don't have to do any work to pay it. Right? You go to the store; they take it out; you don't really think about it. And you certainly don't add up that total over the year. But for lower-income people, the sales tax is a very real expense. Lower income people are very aware of the cost they are paying when it's 6%, 7% at the grocery store, because they are watching every penny in their budget. So, what I found is that, because people focus on the income tax--which does hit the rich more than the poor--and because they tend to forget about the taxes that are easier to pay but are actually very expensive for lower-income people--overall they underestimate taxes paid by low-income people. And this is really compounded when there is rhetoric about the 47%--you may remember from a few years ago--47% of Americans don't pay net income taxes. So, that sort of rhetoric in the public sphere really compounds the mistakes people make drawing from their personal experience.
Russ Roberts: And you give a bunch of reasons, just now and also in the book about why people might forget about certain kinds of taxes: that they are not salient, that they are not in the front of their mind. They don't have a hassle. They get paid out immediately. But the other reason I always think about--and I'd be curious about your reaction, I don't think you talked about this, is: the fact that we've been told, over and over again, that our payment in the payroll tax to fund Social Security and Medicare is a "contribution" rather than a tax. That, I think a lot of people that it pays for their own Social Security or is put aside for them, or is saved or invested in some dimension. Of course, it's not. It goes out the door immediately. And, until recently and in the near future, it went toward everything. It was no different than the income tax in terms of where the money went to there was such a surplus in the so-called Social Security account that the money went to pay for food stamps and war and everything else. So, I always have felt that our people's ignoring of the payroll tax is just a--I think a terrible flaw in how this program, those programs have been marketed. And I think, to be honest, it's been marketed dishonestly to the American people. What do you think?
Vanessa Williamson: Well, one thing that struck me was that people, if I asked them their biggest tax, they would not mention the payroll tax. Right? But if I asked them to name the taxes that appeared on their paycheck, they did mention it. So, this was a really striking difference. It wasn't a salient idea. It wasn't at the forefront of their minds. But, if you asked them, they would say, 'Oh, there's the income tax, and then there's the FICA.' And I was actually--I mean, it always depends, you know, what level of expectation you have. But I was actually pretty positively struck by the amount of information people tended to have about the Social Security and Medicare taxes. Right? They tended to: One, remember them--about, so it was slightly lower and I'm going to forget the number off the top of my head, but it was something like 70% of people remembered the income tax when I asked them. On the survey, when I asked them to name the tax from their paystub. And 60% of people remembered the Social Security or Medicare tax or both. And so, I mean, it was a relatively high level of understanding that those costs exist. In the interviews, I found people tended to know. They didn't tend to think it was in an account for themselves. In fact, a lot of them were worried that there wasn't going to be any money in Social Security. That was a very common concern--
Russ Roberts: Most[?] yeah--
Vanessa Williamson: Yeah. I mean, that was, which is it's own sort of policy-error[?era] problem that deserves its own book and examination of that question, I think. But, so, in a way, they had this understanding, if you drew their particular attention to it. But they had almost no opinion about the tax at all. Because they would name the tax; and then if I followed up and asked them about what they thought about it, they'd just talk about Social Security and Medicare, the programs. They didn't have any thoughts about how the tax was collected; how much they were charged versus other people. Certainly things about the cap were not common knowledge. And there wasn't--you know, a comparison point might be the gas tax. Right? So, if you ask people about the gas tax, they are upset about two things. One, the quality of local roads--because they know it goes, it's commonly known that the gas tax goes to local roads. But, two, they are worried about the actual cost. Like, why can't I see it? Doesn't it cost a lot, people who drive a car for a living? They have thoughts about whether the tax itself is fair. And it was very uncommon for people to have any opinion at all about the tax component of the Social Security and Medicare tax program. Right? So, I think that you are right, that there is on the one hand this complete lack of information--people really forget that cost. But on the other hand, you know, a piece of that program is quite visible, because they at least get to see the number on their paystub. So it was sort of an interesting mix of visibility and invisibility.
Russ Roberts: Now, the problem with the paystub, of course, is that after a while you never look at it. At least, I rarely do. I don't know how much other people look at it. Your book forced me to realize that if I had to guess at what my actual taxes paid are--and I'm an economist, who is interested in taxes--I would have trouble. I don't know how close I'd get. I mean, after thinking about it overall to get close, and even then I wouldn't. So even though--part of it, of course, is that, unlike some of your surveyed folks and interviewees, I get deeply depressed by my taxes. So I try not to look at them. And so, I'm in a separate category, maybe. But I think it's interesting how little we look at that generally, when we don't have to write a check. As sometimes. Of course, sometimes you do. But a lot of times you get a "refund." And it's because you paid in too much. But there's a lot of psychological, I think, problems that we have in perceiving those things accurately. But my preference would be, for a lot of reasons, just to get rid of the payroll tax: roll it into the Federal income tax. And have it be--people would be a little more aware of what those taxes are. And as you also point out, the fact that the employer share is part of it is another reason people may not perceive it fully. So, I don't think that's good for democracy. I think that's a form of obscurity that is not good for us.
Vanessa Williamson: I think that's actually one of the most important takeaways from the book, right? That, when we think about policy, you know, I'm here in Washington, D.C.--when we think about policy, we're often sort of imagining that we are going to do things in an invisible, behind-the-scenes way that just creates good in the world, in some way. But we forget that part of policy-making is making what government does visible. Because people out in the world are not just supposed to respond to little economic nudges, right? They are supposed to make decisions about who to elect to implement policy. So they have to able to perceive it. And they should be able to perceive it accurately. And one of the best ways to make people perceive these accurately--I mean, people learn by doing; that's just a fact--is to make, particularly for the issue of taxes, it's much more easy than on some issues, like what we're doing in foreign countries: it's very hard for people to perceive that on a regular basis. But with taxes--you know, people have a day-to-day experience of these policies. And we can use that experience to make a more informed citizenry. So, I think that's one of the most important takeaways: exploring ways that we can use the taxpaying process to make people better informed.
Russ Roberts: You mentioned the gas tax. I think I'm older than you--maybe by a substantial amount. When I was younger, the gas tax was posted. There was a sign on the pump, and it gave you the price of the gasoline; and then I think it gave you both the State and the Federal taxes. And of course the State taxes vary quite a bit across states; and that explains a good chunk of variations in gas prices across states. But most people aren't aware of that. If I remember correctly--and I have to check this--I think they made it illegal to post those prices. Which I found just--given what you just said, it's just a really bad policy response to that.
Vanessa Williamson: Yeah. I think that's exactly right. I don't know about making it illegal. That's fascinating. I'll have to look it up. But I think that it's--sometimes, you know, and certainly I've heard it, hear it in the Beltway--there's a desire to just make taxes something people can't see. Well, the gas tax is a good example of why that's a bad idea. Because people do not like the gas tax. Right? Even though they understand that it goes for roads, and they like roads. They should like the gas tax, by that standard. But, because they don't know how much it is--and because gas taxes vary so dramatically based on things that don't make a lot of sense to the average person--people tend to sort of ascribe a lot of that to taxes. You know, because it's invisible. They don't really know. And, of course, the other thing about the gas tax that's quite unusual--you actually have something like a cigarette tax--is that it's based on the volume, as opposed to the price. So, you know, it's natural to think, given the sales tax, that when gas prices go up, taxes are going up too. Or, at least the government's getting more money. Right? So, that's obviously not how it actually works. To some extent it would work the other way. Because you can see that people consume less. So, the gas tax has really all of the bad parts of making a tax invisible, and none of the benefits of, you know, the visibility that might come from, 'Hey, this is a tax for people who use roads that pays for roads.' Which is the sort of system that, you know, normally is the kind of thing that people find appealing, when the cost and benefit seem linked.
Russ Roberts: Yah. Yah, no, it's one of the best--it's by far--I can't think of a better tax by far, actually, in terms of--well, maybe the one on playing cards. No, I'm kidding. The fact that it's more like a user fee, or something akin to a user fee. It obviously--well, I just think it's a lot--I'm a fan of that. A quick Google search suggests that maybe it differs by state, on whether you can post or not.
Vanessa Williamson: Ahhh--
Russ Roberts: So, we'll do a little research on that. And we'll put something up more generally, I hope.
Russ Roberts: Let's talk about the rich--higher-income folk. A lot of people misperceive, in your survey, and in your views, what they pay. What's the nature of those misperceptions?
Vanessa Williamson: So, I was not sure when I started this process whether most people actually understood the difference between a flat and a progressive tax. That is to say: Did people have the sort of numeracy necessary to make a distinction between taxes that are set at a flat rate, and therefore wealthy people pay more because 5% of a million dollars is more than 5% of $100? Or, are they really clear on the distinction between that and rates that actually go up themselves? Right? And I was actually--there's some good survey work on this. And it fits with what I found, which is that people are actually pretty good at that. They are not always great at explaining it out loud. Which is understandable, because even I, you know, I have to speak very carefully to say it exactly right. Right? But they actually do understand, for instance, that there are graduated brackets in the income tax. It's a general rule. It's relatively well understood. And when you, you know, ask them questions about what tax systems they prefer, they, you know, can answer those questions in meaningful ways, with percentages that go up. Right? Most Americans support taxes that are progressive taxes, and it falls more heavily on the rich. And when you ask them to actually do the math on that, they tend to, you know, continue to hold that opinion. So, that was good news, right? That basic level of [?] exceptionally important, if we are going to have real, any engagement, any sort, on tax issues. But, because, it again--in part, because of the experience of taxpaying, people tend to think that the income tax, with the graduated brackets, is undercut at the top end by loopholes. Now, of course, to some extent that is true. What you--wealthy people do have access to certain parts of the tax code that average people can't really access. They don't have the money or they don't do the right things with their money. But, you know, as a whole the income tax is in fact progressive, at least until you get up to the very, very, very high numbers. It's mostly a progressive tax. But people underestimate that. In part because, when they are filing their own taxes, the thing that matters is their quote-unquote "loopholes". Right? So--and I should say, when average people, and also when I use the word 'loopholes' I don't mean it in the technical sense of an accident to the tax code. You know, they are referring to all kinds of things that were done absolutely on purpose.
Russ Roberts: Right.
Vanessa Williamson: So. But at any income level, when you are filing your income taxes, you are thinking about what you might think of as loopholes. Right? Lower-income people are going to get their Earned Income Tax Credit. Maybe you've got to remember that you've got your mortgage. Or your student loans. Or you've got books. Or you've got an office at home. I mean, there are a million little things that you've got to remember that aren't about the rates, that have a huge impact on how much you personally pay. Right? And we all--the income-tax paying process doesn't draw very much attention to rates. Now, if you do your tax the very old-fashioned way on paper, you might look at the rate chart for a minute--
Russ Roberts: Sure--
Vanessa Williamson: to look at that last number. Yeah. But first of all that will show you the marginal rates, which is, by the way, exceptionally poorly understood. And most people--you know, you've got an accountant who doesn't--you [?] get on to H&R Block, you get on to TurboTax, you get your TurboTax software--and you know, maybe it shows you first, second what your effective rate was. But that's not information that's really salient, because you can't do anything about it. And because you use enough [?] to remember anything on your own. So, because the income tax playing[?] process draws your attention to finding the ways that you can get quote-unquote "your loopholes", the people extrapolate outward to the very rich. And think that what matters for their taxes is the access to these loopholes. Right? And what it does, unfortunately, is mislead people about the likely impact of most flat tax plans. Right? Most flat tax plans that get put forth would substantially lower taxes for wealthy people. But a substantial part of published support for flat tax comes from people who want to raise taxes on the rich. And, for interviewees who I spoke to who held that view, their explanation was that a flat tax system without loopholes would raise taxes on the rich.
Russ Roberts: You made an interesting remark: you said, except for the very top 1%--except for the very high end. At the very high end, there's a lot of variation.
Vanessa Williamson: Exactly.
Russ Roberts: in what people pay. Because it depends on where their income comes from--whether it's labor income, whether it's investment income. But, the top 1% overall pay a lot of taxes.
Vanessa Williamson: Absolutely.
Russ Roberts: And it's interesting to me how little-known that--there are sort of two things. There are a few things that are little known. One is, you talk about in the book, which I thought you were going to mention just now, which is that, people forget that when you get, quote "put into a higher bracket"--that is, if you earn enough money to have a higher tax rate, that only applies to the extra income. It doesn't cause the lower amount of income to be taxed at that higher rate.
Vanessa Williamson: Right.
Russ Roberts: And, as you say, it's hard to explain: I just did the best I could on my feet and it's not a very good explanation, right? But the second thing is, even with those loopholes, on average, really rich people pay a lot of taxes. So, the top 1%--and of course it's hard--there's different ways of defining the top 1%. You can define it as the top 1% of income earners. You can define it as the top 1% of wealth. The top 1% of adjusted gross income. But, the top 1% earns a very disproportionate share of income and pays a very disproportionate share of taxes. And it's just important. I think that's not well known.
Vanessa Williamson: Right. That's absolutely right. I think that people tend to focus on, you know, the occasional story of a very wealthy person paying a very low rate of taxes. So, Mitt Romney, taxes; or George Soros's taxes; or what have you. Sort of--Warren Buffett is an example used a lot. People talk about these wealthy people. But these people are not just in the top 1%. These people are, you know, people like George Soros are like at the very, very, very top. You know. And so we are really talking about like the .001% and what taxes they pay. And that's actually quite different from people who are, you know, near the bottom of the top 1%; and then maybe they are a wealthy doctor or, you know, a fancy lawyer, or something like that, and they have a lot of earned income--they have a job; it's just a high salary.
Russ Roberts: And there aren't many[?]--
Vanessa Williamson: And they pay quite lot in taxes.
Russ Roberts: So, there's not a lot of loopholes for people who earn a lot of labor income. Right? You're going to pay a big proportion. And you are going to get certain deductions--if you give to charity; if you have a mortgage on an expensive house--sure, then again, as you point out--those aren't really loopholes. Those are just the way the tax code is designed. But you're going to pay a lot of taxes.
Vanessa Williamson: Right. So, the problem with those--a couple of very prominent stories of exceptionally wealthy people paying a rate that's lower than someone that's a doctor or a lawyer is that we forget about all the people who are, you know, by any standard, well off but are not in that astronomical, obscene tax situation of [?] that the rest of us can't even imagine. Getting back to the question about marginal rates, I think it's a really important thing that people--there's a common error that people have in their mind, which is if you go from one tax bracket up to the next one, your whole income is going to get taxed. So, people see that as punitive, which of course it would be if it were true. That would be quite unfair.
Russ Roberts: It's stupid--it's a bad way to design the system.
Vanessa Williamson: It would be a very bad policy. And it's a good thing we don't have it. But, because people perceive the system working that way--that all of a sudden, you go from 10% to 15%, you're going to be paying more than if you made fewer dollars, that it reinforces this idea that, you know, the income tax can punish work. Right? Well, as a matter of fact, if you move up and you make $5 into the next bracket, you're going to get taxed at the new rate on the $5, not on anything else. So, one piece of language I heard in this election year was, Hilary Clinton was talking about a surcharge on incomes. Which was just a very high bracket, basically. But it might have been--I was wondering, and I haven't looked into it yet, whether that might be language that makes people understand how brackets work. It's just a surcharge on that income above the other income. I don't know--it's a hard concept to explain. But it's a really important one and it would be a great place to see an improvement in public financial understanding.
Russ Roberts: Yeah. No. I think it's a common misunderstanding. And part of it's what you pointed out--that most of us don't move dramatically between brackets all the time and think about what the consequences of that. And we don't notice it, necessarily, even if we do move frequently, because our taxes are filed with--our money is deducted from our paycheck, the tax money is deducted from our paycheck.
Russ Roberts: One of the things that struck me about the book--and you didn't emphasize this, I think for a lot of reasons, but I'm curious to get you to talk about a little bit more, is: Even though--these are small things. This issue of marginal versus the average rate is somewhat important. But there are a lot of--one of the things I took from your book is how widely people misperceive what, say, immigrants pay in taxes. Or, what government does with our tax money. And, you know, one view is: That's not surprising. Most people are not tax experts. They didn't study public finance in college. They are busy with their lives, and of course they don't read carefully--they don't have an incentive to. But what struck me about it is--and you do refer to this indirectly, and sometimes directly--a lot of these perceptions are part of people's partisan identity. You know, they, as Republicans or Democrats, or as liberals or conservatives, they hold a certain view of, say, immigrants, or government spending, or welfare. And they are not going to let the facts get in the way. They have certain perceptions of the system that get relentlessly reinforced by the news that they watch, Left or Right, by the blogs that they read, Left or Right. And those perceptions just outweigh the reality. And I just was struck by how damaging that is for democracy, that unwillingness that we have--and it's a human frailty--to be open and honest about how the world actually works. And particularly in this area that's so central, which is taxation and spending. Do you agree with that?
Vanessa Williamson: I think it's a serious challenge. And I think that--there are things in my book that I think--we suggest that politicians are sometimes unwittingly reinforcing misinformation. Every politician I've ever heard, on any part of the political spectrum, rails against loopholes. Right? Because it's popular to do so. Makes sense, right? But, what you are doing is reinforcing a fundamental misunderstanding about the impact of rates. Now, maybe you did that intentionally in order to promote your tax plan that closes some loopholes over here and then does something to rates, and you hope people only notice the loopholes because the other part is not popular. Or something like that. But I think you hear it on both sides. So, it's not entirely--it can't just be motivated. It's just a bad way of conveying information. So, I'm not so hopeful about changing the incentives of politicians to speak more honestly. Where I am hopeful is, particularly on the question of taxation and what government does, a lot of that stuff is actually visible. A lot of that stuff is experienced in daily life. And if we made, I think, relatively small changes that alerted people to things like, you know, you could, for instance, get a receipt for your sales taxes--not your personal sales taxes but maybe your zip code: People in the zip code who have an income of x usually pay about this much money each year in sales taxes; and that goes to support x, y, or z thing because the sales tax goes to the state. Right? So you could provide people--and this sometimes happens already; I think there was a period where they were doing this for Social Security in some localities do it for the property tax--you could provide people with information about where their money is going that might actually--I mean, it's been shown experimentally, in these small cases, to improve people's understanding. So, I don't have a lot of hope that we are going to get politically motivated people at the top to suddenly do the right thing about having a more engaged, educated populace. I think a lot of people have that incentive and that motivation. But, I think that--I came away from my interviews--you know, people are making mistakes; but they are reasonable mistakes. They are mistakes that come from--they are wrong, but they are not innumerate. So to me, it's a mistake that's actually a source of hope. Because it means that the changes we need to make are not like a fundamental reconsideration of teaching math in schools because people are getting out into the world and still don't understand percentages. That's not what I found. What I found is that people are extrapolating from personal experience, the way we tend to do on all kinds of issues. And because of the way tax information is given to them, they are making mistakes. And smart people are making mistakes. Educated people. Politically engaged people are making mistakes. So, that suggests to me that there's a place there where we could do a better job of getting information to people, who would use it well.
Russ Roberts: Well, I think the key part of that last sentence you said was 'we.' And I think the 'we' in that sentence, as you argue, is not going to be the 'we' among us who are politicians. But it could be the 'we' among us who are think tanks. You are at Brookings; I'm at the Hoover Institution. Certainly a non-profit organization could spend more effort educating people. There [?] organizations that do it explicitly: There's the Tax Foundation and others that try to make people aware of what their taxes are and how much they've paid, etc. Again, I just emphasize that, even myself, one of the thoughts I had reading your book is that one of the reasons people over-emphasize income tax over payroll tax is it's so much larger as a source of income [that is, government income, meaning government revenue--Econlib Ed.]. And I looked it up: it's not that much larger. I was surprised that, I think in recent years, the income tax is 46% of tax revenue and the payroll tax is 33%. So, it's bigger. But it's not as much bigger as I would have said if you'd asked me to guess. And so, you know, we're all imperfectly informed[?].
Russ Roberts: What I found, the more provocative part of what I was trying to say is this idea that we kind of like being misinformed. We like being angry about the rich or the poor not paying their fair share. And we really don't want to have it pointed out to us, that we're wrong. We like to carry our resentments around because it makes us feel better about our identity as liberals or conservatives, or Republicans or Democrats. And I think that partisan, team identity, tribalism, is just--I really don't like it. And it's just me--I think it's really destructive. And the fact that it engenders ignorance is part of the problem.
Vanessa Williamson: I mean, I think that there are challenges there, and there's some really interesting work being done to sort of assess when and why people actually respond to new information. Sometimes people will just filter it out. And so I think that that's actually kind of a frontier in Political Science, and I think there's work being done and I think really interesting--we'll have some really interesting answers about in what contexts people are actually willing to take on new facts and adjust their views. I'm actually going to do some of this work myself looking at: Can I improve people's information about who pays what in taxes and actually change their views? So, yeah, I think that that's something that requires more attention. The place where I think it's going to be hardest, unfortunately, is on the question of immigrants. Because that's not just a partisan team question; that dives into some really deeply held and really unfortunate aspects of how people think, which is that people are quite--there's a xenophobic strain; and there's a racist strain in how people think about the world and others. And I think it's very hard to overcome those very deep prejudices. So, what is commonly believed about immigrants is that they don't pay their fair share of taxes. And this is wrong. Fundamentally, immigrants pay a great deal of taxes. In particular, immigrants are, particularly unauthorized immigrants, are often paying into Social Security and Medicare without the capacity to receive those benefits, because they're not here with the right paperwork. They are always forgotten. They are propping up our Social Security system because we have an aging population. And of course they pay sales taxes like everyone else; and a lot of people will also pay income taxes.
Russ Roberts: They also pay property taxes indirectly, either directly as owners or indirectly as renters. So, that bothers me. And I'll also add, though, that in my being pro-immigrant as I am, I get a lot of responses when I mention that xenophobic and racist stuff--I think the phenomena--I think a lot of people who are worried about immigration really resent being called 'xenophobic' and 'racist,' and I'm sure there's at least one person listening right now who is in that group. I do think it's an issue that all of us as human beings struggle with people who "aren't like us." But, I do think there are--there are legitimate issues about taxes and spending with respect to illegal immigrants. It's an issue. I agree with you that I think it's overblown dramatically and many pieces are forgotten, because people I think have general views that are not related to the taxes--they just get lumped in.
Vanessa Williamson: I mean, I think that's right. One challenge that I think we face is that--and I saw this in interviews a lot--is that people would sort of [?]. They would talk about immigrants; and then they would sometimes talk about, you know, undocumented people. And then they would sometimes say Mexican. Right? And so there was an idea that--when people talk about immigrants, sometimes they are not talking about--for instance, my mom, who is an immigrant. She's from Scotland. That's not who they have in mind. And so--we are all capable of these mistakes. And I think it's incumbent on each of us to fight those prejudices that we all carry around with us--on many subjects, including about new people to our country. And we are certainly not the first set of Americans to have these concerns about new people in our country.
Russ Roberts: It's only about 200 years old--
Vanessa Williamson: Exactly.
Russ Roberts: 250 years old.
Vanessa Williamson: So, you look back and you see that people were very concerned about whether the Germans were going to integrate. And the Italians were going to integrate. And so--and that's part of what makes me pessimistic to some extent about the extent to which we can change people's views, because that has been such a long-standing problem for us. On the one hand, we are this nation of immigrants. And on the other hand, each new wave of immigrants gets--assumptions are made about them that are not accurate, not factually accurate. Which undercut our sense of social solidarity. Which is one of the things that makes us good taxpayers. Right? We have faith in one another. We have a common project that we need to pay for. We all need roads. We all trust each other to chip in our taxes so we are going to get the roads that we want, we are going to get the schools that we want. Well, you start to doubt whether everyone in the community is actually this us. And it undermines people's confidence in the tax system.
Russ Roberts: Yeah. So, you know, I totally agree with you; and I'm passionately pro-immigrant, overwhelmingly, in general, in the sense that I think the economic dangers of immigration are grossly overstated. I think the cultural implications are grossly overstated. The worries. But, having said that, and I think this has to be said--and this came up in our recent episode with George Borjas, who is much more anti-immigration than I am. But he makes a point where I think I have common ground with him, and with some others, which is: We have changed the rules of assimilation in the United States over the last, maybe 25, 30 years, and made it much easier for people not to assimilate. We've offered, you know, dual language opportunities and dual language tracks in our schools. I think that's just a fundamental mistake. I think that makes it harder for us to feel like we're part of one country and [?] one project. I don't have a lot of nationalist bones in my body. So, it's kind of awkward for me to talk about that. But there is some benefit from feeling like we are part of one community. That may be unrealistic. That may be a fantasy. But certainly when we make it easier for people to stay separate, I don't think that's a good idea. If people choose to stay separate, I'm all for it, right? If people want to live near people like them, who talk like them, who have attitudes like themselves, who have the ethnic background that they have, I think that's an inevitable part of the human condition; and nothing wrong with that. We obviously mix our integration with each other with our separateness from each other. We move across all kinds of spheres. I just think it's weird that over the last few decades in the United States we've essentially subsidized people staying separate. That seems to me to be a big mistake.
Vanessa Williamson: Well, I mean, sociologists would say that immigrants are integrating at the same rate they always have. They learn English at the same rates; they are opening businesses at the same rate. It's not--there has not been some fundamental shift in this most recent generation of immigrants that's unlike previous generations, to the extent that we have data on this. Now, on the question of whether we should have dual-language schools, though: my son is in a dual-language school. He speaks as much Spanish as English. And that's nothing[?] to me--my Spanish is appalling. And I think that's a wonderful benefit. I'm proud that I live in a diverse community and I'm proud that my son gets to experience other cultures. And I think that--the challenge is making sure that that happens in a way that's, you know, fair for everybody in the community. Right? And that there are ways that we can reach out to one another and learn and grow from each other. And obviously some people, in gentrifying[?] communities I think that there are real challenges of people getting pushed out. This is not some beautiful melting pot story. But at the end of the day, I'm proud that my country is diverse, and I'm proud that we speak a lot of different languages here. And I'm proud that our language develops in new ways. And I think that those are--that is part of the American tradition.
Russ Roberts: Well, I'm not quite sure what the boundaries of that are, in the sense that--I like learning a second language; I don't have any problem with that. I think it's a question of what's mandated and what isn't. And I do think that there is a long, historical fact that parents who immigrate, come to the United States from non-English-speaking places, have a lot more trouble learning English than their children, regardless of how much mandated second-language stuff is going on. But, yeah, no: I think diversity is a good thing, and I love the idea that we're helping people who want to come here, and provide work here, and do the things that provide stuff of value. And I think we should be free to hire those folks, and they should be free to live here. To me it's just a question of where those boundaries are in terms of eligibility for government benefits, taxpaying, etc. And again, how easy it is we make it for people to become part of that melting pot. But I do think it's an interesting phenomenon that we do both: We want to be part of the melting pot, we want to be Americans; but we also want to keep our ethnic identity whatever the hyphen that often we want to keep. And that's a reality, too.
Vanessa Williamson: From my perspective, I think that the most important thing is that we recognize that we have common goals. We do. Right? Like, if we create--
Russ Roberts: I don't know about that. I'm not sure what you mean by that.
Vanessa Williamson: You don't think we have?
Russ Roberts: I don't know what that means.
Vanessa Williamson: Oh, okay. Yeah.
Russ Roberts: Common goals--tell me what you mean by that. I mean, we're off the subject of taxes. But that's fine. Go ahead.
Vanessa Williamson: Well, I'm going to bring it back to taxes. So, when we think about, 'What are the things we want government to pay for?' we want clean air, good streets, decent schools. You know. These are common goals. Because I can't just have good streets for me. That doesn't make any sense. If only my children are educated--then obviously the economy would collapse. But the point is that there are things that are common goods. Right? And I can't just provide them for me and my family even if that was the [?]decision I wanted to make. And so, the question of immigration and more generally, right?--this is a diverse country in a lot of ways, not just because of a new wave of immigration. Different parts of the country are really different; and we're a very large country. And making sure that we focus on the things that we need to do together--that's what taxes are supposed to pay for. And I think it can help us bridge divides, of not just race and ethnicity, but rural/urban divides. You know, we have very different ideas about what are like on a daily basis. But we have shared needs. Right? We need the roads. We need to maintain the infrastructure that lets us be one country. So, to me that's actually the thing that's kind of great about studying taxes, because on the one hand you are talking about a subject that even an economist like you doesn't really want to think about that much. You don't want to get into the nitty gritty of it; you don't really want to go through it; it's a painful experience every March or April, whatever, to get the paperwork done. You don't want to think about it. But you talk to people about taxes, and you tap into their deep down immediately : about who's us and who's them, about whether they feel represented by their government, about what kind of country they think we should be. So that's what the really great thing about studying this question: it's not just about forms and rate tables and marginal brackets--all of which are interesting and important. But it's about the way that we work together to pay for the things we all need.
Russ Roberts: So, let's talk about that. Because that's where I was going to turn next anyway. I'm going to try to summarize--and then I'm going to disagree with you on this issue of what we all [?] shared goals, so we can see where we agree and disagree. In your survey results, and maybe in your interviews as well, you found that people like roads--I'm reading off a list here of yours--roads, sanitation, fire, police, education, and national parks. You found a lot of interesting stuff about foreign aid and military spending which we're going to come to in a minute. But let's just stick with these more local, within-our-borders at least, activities. So, roads, sanitation, fire, police, education, and national parks--I had two thoughts. One is, a good chunk of those are local, not Federal. The only really Federal part of that is national parks. A little bit of the Federal highway system. A little bit of education, but roads, fire, police, and sanitation most come locally. I'm pretty enthusiastic about those. I'm a libertarian, a classical liberal. I like limited government; I want a bigger sphere for private activity, both profit and non-profit activity. But if you said to me, 'Government is going to provide the roads, sanitation, fire, police, and the national parks,' I'm leaving off education; we'll talk about it in a minute. But, roads, sanitation, fire, police, and the national parks--I'd say, 'Yeah, like you point out, I can't go on my nice road and your road has potholes. We're going to be on the same road.' So, you can make a case for private roads; I don't find it that persuasive. And it's just not that big an issue for me. So, I'm okay with all that. Let's let government do roads, sanitation, fire, police, and--and I love national parks. They are often badly run and they tend to subsidize attendance and wear out the ecosystems, which is a national political response. They take out wolves, often, because wolves are scary--which is bad. So, Yellowstone I think was mismanaged for about a hundred years. But, overall, I love the national parks. You know, I get my quibbles. But if you take roads, sanitation, fire, police, and national parks, you've got a really small government. You don't have--there's no welfare in there. There's no subsidies to corporations. There's no farm subsidies. There's no National Endowment for the Arts. Etc. All the stuff--I think we could do without ¬all that other stuff. And if we just did roads, sanitation, fire, police, and national parks, you'd have tiny government, really low tax rates; and we could all pretty much agree that those are good things. Once we add those other things, we get into a lot of fights. We don't agree. There's a lot of disagreement. And certainly--well, I'll come to education in a sec. Just respond to that, first.
Vanessa Williamson: So, I might as well start by putting your views in sort of the broader context of how other people think. Right? So, what I found is that there is sort of an array of programs--oh, I should be clear. I asked people two questions in the survey. I asked: 'What are you glad the tax dollars pay for,' and 'What are you upset the tax dollars pay for?' And I put that on a graph--
Russ Roberts: Two questions related to this conversation, this part. You asked a lot more questions.
Vanessa Williamson: Yeah, to this particular question. So there are two questions that are relevant for this particular part. And so, I looked at two things. I looked at how often was a program mentioned, positively or negatively. And then I looked at--given that you mentioned it all, how often were your comments positive? And so, the programs that did best, in terms of 'If someone bothered to mention, they were mentioned positively,' tended to be local services. Right? Education, roads were both extremely popular: 90-plus percent support for these programs, that sort of a thing. And also, education and roads were very commonly mentioned--about a third of people mentioned them. And then, other programs were just as popular but were less commonly mentioned. So you'd see things like the sewer system. Anyone who bothers to mention the sewer system thinks that it's a good thing that we have one. Right? But it's not always remembered. So, that's what you'd see. You'd see this sort of swath of programs that were thought of very positively: some more commonly remembered than others. Then, at the very bottom, the least popular programs, which were also not--weren't brought up all the time--were, basically, there were two major things. One was foreign aid, which I can talk a little bit about, how people think about foreign aid. The other was corporate aid of one sort or another. So, no one in my survey bothered to mention bailouts for banks in any way except as a negative thing. So, that was sort of the spectrum. And then in the middle you've got all the major components of the welfare state. Now, Social Security was almost as popular as those local programs you mentioned. And then health care was--had quite high levels of popularity, but had a partisan divide--as you'd imagine, with Democrats much more positive about it than Republicans. The military had very mixed views, because there was generally, unsurprisingly, strong support for American service members but strong concern about the military engagements overseas--as I'd expect anyone who watches the news would imagine that that's how Americans think about that question. And then finally there's welfare spending. Which is a category in which I put any program that was means-tested. Right? So, that's food stamps, but it's also TANF (Temporary Assistance for Needy Families)--I mean it's also all the programs, and then also, a lot of people on a survey when they are asked an open-ended question just say, "Welfare." And it's not clear what they mean by that. So, right. So there are those programs at the top where there was near-consensus approval: Your list plus education and Social Security, I would say. And then some things that no one likes. And then these things in the middle that have people of mixed views. And I think that, you know, there's always going to be a place in our politics for disagreement. Politics needs disagreement. We should not all think alike and we should have an active debate about what our country needs to be like. And so, for instance, your dropping education from your list of programs that you think, 'Yeah, we should definitely be paying for that,' makes you unusual as an American. But that's fine.
Russ Roberts: I [?] that.
Vanessa Williamson: There should be a public debate. So I think that that's sort of the spectrum of people to be used. Right? And, you know, one thing that was good for me to hear is that there are things that we all agree on. And, you know, I think the fact that major other parts of what our government does or something we're discussing, could be signs of vibrance of our democracy, if it were getting channeled upward into our politics in a way that was meaningful. And I think that's where it falls apart. That's not what we see happening. We do not see--you know--a debate going on in our--at least not often do we see a debate going on in our legislatures that really, I think, captures, you know, the essence of these issues so that we can discuss them in a meaningful way.
Russ Roberts: Yeah, just to be clear on a lot of these. There are a bunch of things that government does that shouldn't be done at all. Like, um, some of our foreign policy adventures. And if government stopped doing them, they wouldn't happen. Because we are not going to band together to make them happen. If government stopped funding education, at the Federal and even at the local level, there'd still be a lot of education. It just would be paid for out of pocket by the consumers and parents--who are the consumers on behalf of their children. And I believe strongly, because it even happens now, that a lot of people would donate money; and schools would be started--not-for-profit schools would be started that would help educate people who didn't have the means to pay for their own education. Which I think would be a much better system than the one that we have now. A much better system for poor people. That's just really important. Obviously there are different reasons people might resent certain types of spending that the government does. I'm against government spending on education because I think it gets--not just ineffective; I think it's a system that has punished poor people for a long time. So, I know you were speaking casually earlier when you said if we didn't have educational spending it would be a disaster for the economy. I don't think it would be at all. Because I presume--I might be wrong--I presume that private spending would respond, and in a very dramatic way, if government got out of that business. I don't think it would respond in a dramatic way to other things the government does--foreign policy adventures, corporate bailouts--I don't think people would be voluntarily giving to charities that give money to corporations. And, I think it would be really hard to organize roads and sanitation privately. So, I think those are examples where the money is very well spent. But I think on education and certain other areas, it's been a disaster. Now, you don't have to respond to that. You can if you want. Otherwise I'm going to move on to a different point.
Vanessa Williamson: Well, I mean, I'll say--and this is my opinion as a citizen that has no particular bearing on my book[?] which is merely to present what most people's views are. But, you know, to explain my earlier comment, I think I'd say that we had historical information about how good education is when it's not publicly funded. And I think if you look at the literacy rates in the United States' South for a long time before there was robust funding for education, you'll find that they were exceptionally high. Moreover, I think I would say that I don't think it should be the case that if you are a child born to poor parents you should have to rely on charity to get an education. I don't think that's the country we should live in. But that's--but this, us having this discussion, is great. Us having this discussion is the kind of thing that needs to happen in our politics. Because when we talk about taxes we are talking about really fundamental things that we think are rights. What do we think? People have a right to access--what do we think American kids should all have, no matter what? Whether people are feeling charitable that day or not? Right? So, this is, I think, exactly why, you know, the sort of discussion of taxes. And you know, people seeing themselves as taxpayers is such an important thing. Because it provides people a sense of this vital question of what we pay for together. But: Let's move on to other things, because I would be happy to talk about education, immigration as just a citizen. But that's not what your listeners want.
Russ Roberts: No, I don't know. I'm just going to make one more thought on the education. I don't think a child born to poor parents should have to suffer through what is currently our public school system. And I think our failure there is--is inexcusable, actually. I can't--I find it fascinating that we have--we as a body politic have let that happen. Maybe you are more optimistic than I am about it getting better. I don't know.
Vanessa Williamson: I mean, I'm a product of the American public schools. And--I think that any examination of my resume would suggest that it didn't turn out terribly--
Russ Roberts: Mine, too--
Vanessa Williamson: But, right. It's not.
Russ Roberts: I grew up in a rich suburb of Boston. My parents weren't rich. They were middle class at the time. But I grew up in Lexington. I got a pretty good education at Lexington High--anyone out there listening who went to Lexington High, hello! But, in Dorchester and Roxbury, I don't think they had a very good education. There's a lot--I just don't--
Vanessa Williamson: I mean, obviously, there are many things that we can improve about all kinds of aspects of, you know, the education system and so many other things. Right? My husband's from Boston, grew up in the city of Boston, went to Boston public schools. And he turned out okay, too. But, you know, I think that there's, um--I think that it's great that these kinds of discussions exist in our politics, because I think that the thing that tax money does is give us a place where democratic decisions get made about our priorities. And the fact that you and I personally disagree on this thing is just an example of that. Right? An example of the system that we need.
Russ Roberts: Yeah, I agree.
Russ Roberts: Let's talk about an issue that I thought you didn't pay enough attention to in the book. It kind of surprised me. And it's something I hadn't thought about until I read your book. So, it did prompt me to think about it. Which is: A difference between local, state, and Federal taxation. I think when a lot of people think about taxes--and we talked earlier about the salience of income tax versus others. And one of the reasons we think a lot about the income tax is that--we talk a lot about changing it. We don't talk a lot about changing the sales tax. There aren't a lot of campaigns: 'I'm going to raise the sales tax a quarter of a percent!' It happens. Occasionally that's an issue on the ballot in a political discussion. But, the property tax rate, the sales tax, other types of local tax, things that are local taxes are often--they are just not up for grabs the way that the Federal tax code is seemingly constantly in the air. So that's one reason. But what struck me--and maybe you'll agree or not--is that a lot of the taxes that people--a lot of spending that people like is local. Or, as you point out, so security--they actually think that they are contributing to it. You find some evidence that people feel that they are entitled to it because they 'paid in.' Which, there is some truth to--it's hard to--you can interpret that in different ways. But, I was just struck by how often--I think when people are talking about their taxes, they are talking about their Federal taxes. And the reason that's important is that you talked a lot in the book--we haven't talked about it much here--but you talk about it in the book about a feeling of collective sharing, of responsibility and a feeling of identity. And how being a taxpayer entitles you to complain or not complain. And, I kept thinking, 'Well, when you have this perception'--which I think is inaccurate, that 40-something percent of people don't pay taxes because people forget about the payroll tax and they don't think about the local taxes--they are really thinking about the Federal tax part. Which is the--defense budget; it's overwhelmingly the defense budget, not in the sense that it's most of taxes. But once we've taken out Social Security and Medicare, we're going to be, inevitably talking about defense spending. And I just think that's a--that's a lot of what's going on in people's misperception that they, they see their tax identity as Americans as mostly the Federal tax. And that local stuff-which they like--that stuff they don't even notice the taxes for. It's just kind of strange.
Vanessa Williamson: Yeah, I think that's right. And I think that's one of the things that makes taxes controversial in a way that in some sense it needn't be. There are these huge swaths of what we buy with our taxes, we just happened, mostly by locally or at the state level, that we like. Almost all of us agree. Right? And so, yeah, I think you are right: the focus at the Federal level does, to some extent, make taxation seem more controversial than it otherwise could. And particularly not just at the Federal level, because Social Security and Medicare are relatively well-liked programs, in part exactly because of what you say, that people feel they've chipped in and therefore have earned some. But specifically looking at the Federal income tax, that is--that is the sort of hotbed of controversy. Right? It's both a very complicated part of the tax code which people don't like because they feel like it allows for cheating. And, on the other hand it pays for things that are highly controversial. So, yeah, I think that's exactly right.
Russ Roberts: Before we leave--we've got a few more minutes, but I want to make sure we talk about two more issues that really were informative, that I hadn't thought about. One is: It's very common for pundits to make fun of the American people because they think Foreign Aid is a big part of the budget. And of course, foreign aid is a tiny part of the budget. But you really uncovered something I think really important. Talk about the way people conflate foreign aid and defense spending.
Vanessa Williamson: Exactly. So, this is a common statistic that people regularly use to suggest that Americans are very dumb: 'Oh, when they are so upset about Foreign Aid and they think it's this huge part of the budget: Foreign Aid is in fact about 1% of the budget. If you include all the security aid, maybe 1.5% of the budget. Something on that order.' And when you ask Americans to estimate it, you get an answer that is often like 25% of the budget. Wow, are people ill-informed! But, when you--but when I looked, survey work on this, and I wanted to understand--and I had noticed in the interviews that when people talked about foreign aid, they were often talking about military spending. You know? They would talk about they don't think we should be spending so much on foreign aid, and then go immediately into a long discussion about what was happening in Afghanistan. And of course, there is absolutely foreign aid going to Afghanistan. Then there's also vastly more spending that was military, certainly at the time; there's a particularly large amount of interviews[?] a few years ago. And so the question to me was: Are people using the phrase 'foreign aid' when they mean foreign spending, shall we say? Which includes parts of the defense budget that are spent overseas. And survey research would suggest that was true. In fact, people who were asked to estimate foreign aid and then were asked what they meant by foreign aid, those who said things that were military had substantially higher estimates of the foreign aid budget. So, this does not mean that people have perfectly accurate views of the foreign aid budget. Rather, it means that they use the term in a colloquial way that's different from how policy makers use it. That is to say that when people say 'foreign aid,' they don't just mean the technical part of the Federal budget that is allotted to humanitarian assistance. That's not what they mean. They mean the vast amounts of money that we spend overseas. Which includes a lot of the military budget.
Russ Roberts: Yeah. It's just a fantastic insight. And a related one is this--which really surprised me but I think it explains a lot of what people hear when they hear politicians, which is different from what I hear--which is: when politicians rail against waste, fraud, and abuse, I assume they are talking about--it's a really tiny portion of what government does. Government does, a lot of what government does is send checks out to people. There's not a lot of waste, fraud, and abuse--there could be some fraud: People could be lying about their status, obviously, and being deceptive. And that's real fraud. But in general, waste, fraud, and abuse is a very small part, in my feeling, of government spending. And so when politicians say, 'When I come in, I'm going to cut waste, fraud, and abuse. I'm going to save all this money,' and I always think, 'There's not that much to cut. It's a lie.' But among your respondents, they had a very different perception from what I think about as waste, fraud, and abuse. So, talk about that.
Vanessa Williamson: Exactly. So, right. You're thinking in the technical, policy-term, which is about, over-ordering, double-ordering--that sort of thing--fraud, as you mentioned. These sorts of things--contracts that were just--
Russ Roberts: Overinflated--
Vanessa Williamson: received fraudulently. Right, overinflated: sometimes defense spending is overinflated. These sorts of ideas. And that is part of what Americans are talking about when they talk about waste. But when you ask them about what they mean by waste, first of all, they talk a great deal about programs they don't like. So, on the Left, we're talking about defense spending; on the Right, they're talking about welfare. But, you know, this is what people mention: programs they don't like. Now that is not reasonably described as 'waste,' if in fact the policy maker is doing what the bulk of the American public would like. Now, you might reasonably consider it waste if you think the entire program is ill-conceived. Used in a non-technical sense, you could call that waste, because obviously it's pound foolish. It might be penny wise, but it's pound foolish. So, people commonly use 'waste' in that way. So, when you get estimates of waste that are approaching the 50% mark, if you ask people, 'How many cents out of every dollar do you think the Federal government wastes?' And the answer, often the average answer is, often, somewhere around 50%. People are not actually thinking that 50% of the Federal budget goes to crooks who are over-inflating their contracts or cheating in some sort of program--
Russ Roberts: $400 dollar toilet seat, coffee maker, in some budget.
Vanessa Williamson: Right. So, there's some of this--there's some of those. People definitely remember the toilet seat; and they remember the Bridge to Nowhere comes up; the hammer was commonly remembered as an example of waste. These are well-known examples. But they are also talking about these programs they don't like entirely. And, finally, they are talking a lot about systemic problems they see with our democracy. When people talk about waste, they move, very often, from waste, to, for instance, corporate control of--you know, that congressmen are bought and sold. Or, 'They are all so rich and they live these luxurious lifestyles here in Washington.' And so, the word they use is 'waste.' But the critique is really of some kind of elitism, of a government that's not living up to the sort of democratic promise, either in that they are not responding to their constituents or that the people who are elected live lives so far above and apart from average people that it's sort of fundamentally corrupt. So, people's estimates of waste are often tapping into those much larger sentiments about problems with government rather than the much more specific terminology that you and I would use, technical terminology about waste, fraud, and abuse. But the problem, of course, is exactly what you said: It means the politicians can rail against waste; people imagine there's immense amounts of it; and at the end of the day you are not going to balance the budget easily by rooting out that waste, fraud, and abuse. It just doesn't provide enough bang for the buck, basically, to do what politicians often claim that it will.
Russ Roberts: But it was some comfort for me. Because I understand--it's nice to know that some people might--you earlier said, I'm not like most Americans. I think that's a really accurate observation. But this is one place where I'm somewhat similar, in that I would call, in a casual sense of the word, say, an Amtrak subsidy--which I benefit from, often--or various corporate welfare programs as 'wasteful,' even though they are not wasteful in the technical sense of the word, meaning 'the money didn't go where it was supposed to.' It's going where it's supposed to go. It's just something I don't think is worth spending on.
Russ Roberts: So, just to close. You had an interesting question you asked your respondents about: 'If they were writing a book on taxes, what would be the most important chapter?' So, I want to close by asking you--your book has 5 or 6 chapters, I can't remember; there are a lot of different ones--what's your most prominent take-away that you want to share from your book that would summarize what you think is our overall view of taxes?
Vanessa Williamson: I think the most important thing is to recognize that people see taxpaying as evidence that they are contributing people. And when they are angry about the taxes, the most common thing they are angry about is the idea that someone else isn't paying their share: We have this important civic commitment; we are all in this together; and someone's not chipping in. And unfortunately, as the rest of the book shows, people have real, strong misinformation about that particular question that makes it hard for people to connect their values with policy. And so we need to do a better job of getting them the information that they need so that smart, educated Americans who have misperceptions of the tax code can get their values to be reflected in the policies and the politicians that they support.