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Why voters support tax cuts

Teddy, at a blog called It's Still the Economy, Stupid, wrote this post commenting on an article that appeared in today's New York Times, Cloudy Thinking on Tax Cuts. I also found this article worthy of commentary.

Alan Krueger, the author of the New York Times article, clearly intends to imply that, if only the average person knew how they were being taken advantage of by the rich, and how much they would benefit from a more "progressive" tax structure, then they wouldn't support tax cuts. It was suggested that "good political spin creates preferences that aren't in people's interest."

It should be clear that there's a lot more than "political spin" going on here. At the same time that Republicans are spinning their tax cuts, the Democrats are spinning the opposite point of view. One would think that the two "spins" would cancel each other out, and therefore spin wouldn't be much of a factor.

Nowhere in the article is it suggested that people might know about the Laffer Curve (which demonstrates how lowering tax rates can cause tax revenues to increase). Or that they might believe that tax cuts for the rich would trickle down to benefit everyone. This is not to say that either of these viewpoints are correct, but they are viewpoints that are out there and the article is remiss not to mention them.

Perhaps people follow the libertarian philosophies of Ayn Rand, and view government confiscation of rightfully earned money as ethically wrong, even if it's done--or maybe especially if it's done--for the purpose of wealth redistribution?

Of course, I'd be the first to point out that the average person has neither read The Fountainhead nor has ever heard of Arthur Laffer. But I feel that there is some truth in the point that many people who aren't rich are nevertheless philosophically opposed to big government, even if the purpose of big government is, theoretically, to benefit those who aren't rich.

So far, the article sounds like just another example of liberal bias at the New York Times. But if the author of the article wanted to go further to show that the average voter is uninformed, he should have pointed out that a Time Magazine survey done for the 2000 election "revealed that 19 percent of Americans believe that they have incomes in the top 1 percent, and a further 20 percent believe they will someday." (Source: New York Times: On Target and Off in 2002.) This indicates that a sizeable plurality of 39% of Americans believe that they are presently rich, or will someday be rich, and thus would have a clear motivation for supporting tax cuts for the rich.

How could so many people irrationally believe that they are rich? My guess is that the two factors working here are optimism and cognitive dissonance. In the United States, optimism is strongly encouraged, and rational realism is looked down upon. For example, tell someone that you won't likely ever get a much better job than you currently have, and you will be sternly rebuked for your "negative thinking." And the other factor, cognitive dissonance, means that people are unable to admit to themselves that they are failures, and thus prefer to believe in the fantasy that they are actually at the top.

Given those surprising survey results, liberals who want to convince Americans to support redistributionist tax and spend policies will have a tough row to hoe. Not only do they have to rebut the arguments of libertarians and conservative economists, they also have to overcome the powerful psychology that compels people to believe that they are rich when they really aren't.

posted Thursday, October 16, 2003