The success of the Biden Administration will depend, in no small part, on raising taxes. Tax increases will help pay for the most ambitious items on his agenda, and they will curtail inequality. But of course, the very idea of tax increases is anathema to many Americans. Opposition to taxation has a long and distinguished pedigree. In The Federalist Papers, Alexander Hamilton wrote that it would be “impracticable to raise any very considerable sums by direct taxation.” In Hamilton’s lifetime, this opposition would manifest itself in the form of the Whiskey Rebellion. In ours, it comes in the forms of the Reagan Revolution and the Tea Party. A general aversion to taxation is, by one understanding, what makes America exceptional in the international system. Unlike our European cousins, we do not have a popular socialist party, nor has there been long-standing support for policies that would approximate socialism. As a share of GDP, the tax money collected by government in the United States lags well behind most OECD countries. On its own, growth in inequality has not dramatically increased support for taxation, despite the predictions of theoreticians.
In my first year out of college, when I was working for this very magazine, I thought I’d stumbled on a possible solution. That year, I’d sent the IRS a check, and I was stunned to receive nothing in return. Research by Suzanne Mettler and others had made clear that many people who receive government benefits don’t appreciate that those benefits came from government. To close this informational gap—to let people know, in other words, that Medicare is a government program—in 2010 and 2011 I wrote a series of articles for Democracy and The Washington Post in which I advocated that the federal government provide all taxpayers with a “taxpayer receipt.” The idea of a taxpayer receipt is simple. Just like an ordinary receipt, a taxpayer receipt documents what, precisely, your taxes have paid for. It does so by taking the amount of taxes you’ve paid and then breaking down government spending on a per-capita basis. For example, if you paid $1,287 in federal income taxes one year, and 10 percent of federal government spending went toward defense, your receipt would show that you’d paid $128.70 toward defense—and so on, for other government spending categories, until every dollar you’d paid in taxes was accounted for.
A taxpayer receipt is a crude tool. It generalizes spending into broad categories, sometimes oversimplifying in the process. Government taxing and spending don’t actually work like the receipt implies, with the IRS collecting taxes and then disbursing the appropriate amounts to the appropriate agencies and departments. In reality, the IRS collects money, deposits it into the Treasury, and then Congress and the President wage a routinized battle over how to spend it. Tax money, in reality, is fungible; one dollar taxed could just as easily go to funding roads as paying off the national debt.
A taxpayer receipt may be subtly misleading. But as a tool capable of informing people about the uses of their tax money, it would be hard to beat. With a receipt, I would have less of a reason to think that government was wasting my money. Though I might disagree with how the government had spent it, a receipt would disabuse me—and others—of the sneaking suspicion that all my money had been wasted. I’d have a more precise, personalized idea of what government actually did with my money, and so would many other Americans.
While I championed the receipt publicly, I had little expectation that anything would come of it. Rarely do policy proposals become policy reality. So you can imagine my enthusiasm when President Barack Obama announced in his 2011 State of the Union address that his Administration would indeed create a taxpayer receipt. “Because you deserve to know exactly how and where your tax dollars are being spent, you’ll be able to go to a website and get that information for the very first time in history,” he said. I couldn’t have said it better myself.
What followed was more than anything I could have realistically hoped for. Between 2011 and 2014, people could log into a White House website, enter their income over the previous year, and see a breakdown of where their tax money had gone. It wasn’t exactly a receipt, in that it wasn’t given to taxpayers after they had paid their taxes. In fact, their exposure to this receipt depended on their ability to find the website and their willingness to volunteer their time and personal financial details. Contrast this with stores that are so eager to give you a receipt they promise you a full refund if you don’t receive one. There was a miles-wide gulf between what the U.S. taxpayer receipt could be and what it actually was.
Still, it was something. At the least, it would give people a look inside government, increasing their knowledge about what exactly government does with their money. As economist Alice Rivlin once argued, “Taxes are more acceptable when the taxpayer knows exactly what they are to be used for.”
To find out if taxpayer receipts can indeed improve people’s attitudes toward government spending, I fielded an experiment in 2012. In my experiment, some participants were randomly exposed to their taxpayer receipt from the past year, based on the White House data available at the time. Some other participants were randomly shown something else: a “Benefits Number.” Marrying publicly available data to participants’ responses to demographic questions, the Benefits Number presented participants with only a monetary estimate of how much they’d benefited from government over the previous year.
The logic behind including a Benefits Number is simple. Maybe instead of wanting to know the details of where their taxpayer money went, people only want to know how they personally have benefited from government. Perhaps people don’t need any formats familiar to them from consumer life to make them aware of government benefits they are otherwise neglecting. Perhaps they just need to know that they’re benefiting from government in the first place.
The existing scholarly literature on tax attitudes gives us reason to believe this might be the case. As Anthony Downs put it, “If voters are unaware of the potential benefits of certain types of government spending,” then the resultant federal budget might be less than what it would be were voters aware of all the benefits that government provides; by implication, making them aware would increase government spending.
According to Jack Citrin and David Sears’s canonical look at Americans’ tax attitudes, people mostly want government to provide them as many benefits as possible, at as little cost as possible. Their book Tax Revolt: Something for Nothing in California, written in the aftermath of the California “tax revolt” of the late 1970s, marshals survey data to reach conclusions about how Californians feel about their taxes, and how Americans in general do. As Sears and Citrin wrote:
Substantial majorities of the California electorate wanted cutbacks in government spending and taxes, and expressed strong preferences for a smaller or less powerful government bureaucracy, while at the same time (and by equally strong majorities) requesting additional services in most areas of government responsibilities This paradoxical mixture of attitudes prevailed throughout the period of the California tax revolt. And the same mentality is evident in the attitudes of Americans nationwide.
In other words, when it comes to taxes and government spending, people want a free lunch. (Or, as Sears and Citrin memorably described it, people have the following incompatible demands: “Taxes, No! Big Government, No! Services, Yes!”). The Benefits Number distilled this desire, completely evading the question of costs and focusing on benefits alone. It bore no resemblance to any object in the consumer world. For a moment, it told people who see it that they have only reaped benefits from government. To take Sears and Citrin seriously is to think that this is the kind of fantasy in which Americans want to indulge.
The inclusion of the Benefits Number made this experiment a test of two competing theories. The taxpayer receipt would test whether informing people about government would enhance their trust in government. Meanwhile, the Benefits Number would allow for a test of a simpler, contrary proposition: that people simply want to know how much they’re getting from, or benefiting from, government. Costs be damned; people want their benefits.
The study proceeded as follows. After answering demographic questions, recruited participants were randomly assigned to see either their Taxpayer Receipt, their Benefits Number, a combination of their Benefits Number and their Taxpayer Receipt, or neither. All data and spending categories came directly from the White House online taxpayer receipt; however, to prevent respondents’ feelings about President Obama from influencing their views of the receipts, the data were not identified as such.
The Benefits Number combined general approximations of the value of the federal cash transfers, tax expenditures, and tax deductions that likely redounded to subjects over the previous year. The cash transfers incorporated into the measure are those that flow from the federal government to local governments and those that flow from the federal government to individuals. Five such transfers were included: Social Security benefits, veterans’ benefits, federal student aid, Medicare, and the per-pupil federal contribution to local public education. The policies included were chosen because of the broadness of their beneficiary base and their status as items that, according to Mettler’s work, many people might fail to pick up on as originating from the government. After seeing either their Taxpayer Receipt, their Benefits Number, a combination of both, or neither, all participants answered three workhorse questions from the American National Election Study about political attitudes, including trust in government spending.
The Taxpayer Receipt, I’d hoped, would let people know that the government was not in fact wasting all of their money—their money had actually been spent on something—and they’d trust how government spends their money more. But the expectations I’d confidently proclaimed from the mountaintop of The Washington Post and Democracy had not been borne out. The receipt was not some kind of magical elixir. Letting people know what the government was doing on their behalf had not actually caused an uptick in trust in taxing and spending. While there was some evidence that the receipt had changed attitudes in the direction I’d anticipated, so had the combination of the Taxpayer Receipt and the Benefits Number, as well as the Benefits Number on its own.
In thinking about tax attitudes, I’d neglected to think about the role of fairness. More precisely, I’d neglected the role of consumer fairness.
Taxes and Consumer Fairness
Recall the last time you went out to eat. Were you taking your spouse out for a meal, enjoying a night away from it all? Or were you rushing from meeting to meeting, scooping up a sandwich on the go? Either way, you likely made a decision that reflected, however intuitively, some notion of consumer fairness. Consumer fairness is quite different from the kinds of fairness political scientists and philosophers are used to thinking about in political contexts. It’s more anodyne and, by definition, more likely to affect consumer decision-making. But that doesn’t mean it can’t have political effects.
If, the last time you dined out, you went to a nice restaurant, you were probably willing to pay more than if you were grabbing a quick bite, and vice versa—even if the food were exactly the same. Alternatively, if at the end of the meal you were told that an unexpected surcharge would be added to your final bill because the duck you had ordered was an especially rare item, you would likely not be happy. Either way, of course, you would presumably expect to pay something. If your waiter at a fancy restaurant or the person behind the counter at a sandwich shop had told you that your food was free, you might have recoiled, assuming that you were being served yesterday’s leftovers.
This isn’t to say you wouldn’t prefer to pay the lowest price possible. Of course you would. But you likely are not a single-minded pursuer of low prices.
Central to consumer fairness is the idea that people are willing to pay more for an item if they believe that the costs of producing it are roughly commensurate to the price paid for it. Consumers are even comfortable with profits. But if profits appear excessive or exploitative of a particularly unfortunate, unpredictable situation—as when a store selling snow shovels hikes prices exponentially after a snowstorm—they may be unhappy. Generally, people want price increases (to them) and cost increases (to the firm) to align. Consumers neither want nor expect a free lunch. Within certain parameters, they are willing to pay for what they buy, and they are even willing to grant the firm a profit.
Consumer fairness isn’t just an airy-fairy, abstract concept. People’s perceptions of fairness have real consequences. Consumers weigh the fairness of a particular good’s price when deciding whether to purchase it. When they feel that a vendor is not being fair, consumers are more likely to be dissatisfied with the good sold, if not outright angry. They are also likely to tell other consumers about the perceived unfairness, leading to negative costs for the vendor. For their part, vendors are acutely aware of consumers’ perceptions about unfairness.
The contours of consumer fairness have recently been mapped out by researchers who have found that, when forming perceptions of fairness, consumers consider the “alignability” of price increases with cost increases. To them, aligned costs are those that directly relate to the item being sold, while nonaligned costs “are legitimate costs incurred by the vendor that do not have a self-evident association with a specific vendor offering, such as rent.” Generally, if people believe that a price increase has occurred due to an increase in a firm’s alignable costs, the price increase will be regarded as fair; if the price increase cannot be explained by an alignable cost increase, people will regard it as unfair.
Consumer fairness broadly implies that people are sensitive to perceptions of both the costs they’ve paid and the value of what they received in return. When they go shopping, they are neither monomaniacal seekers of low costs, nor do they frown whenever a firm profits. And if you ask them, they’re perfectly happy to tell you that, all else being equal, they’d prefer the value of their government benefits to approximate the taxes they’ve paid.
In the first Taxpayer Receipt experiment, I had spent lots of time trying to give people accurate, or semi-accurate, depictions of where their tax money had gone and how much money they’d received in government benefits. While I was happy to do my subjects a favor by sharing this information with them, my commitment to realism was also limiting. To test whether such sensitivity extends to political attitudes, I would need to manipulate the stuff of which people’s perceptions are made.
And so, in this new experiment, I presented people with artificial estimates of both the amount of taxes they’d paid the previous year and the amount of benefits they’d received over the previous year. If people do indeed prefer for their costs and benefits to align, they should view their taxes most favorably when they are told that is the case. Conversely, if people just want a free lunch, they should be happiest when they are told that’s what they’re getting. The experiment was designed to put both perspectives to the test.
In September 2016, after collecting participants’ demographic information, I showed them a slide offering some basic explanatory details about government costs and benefits. Then I randomly assigned people to conditions in which they were told that their costs exceeded their benefits (the Costs condition), their benefits exceeded their costs (the Benefits condition), or the two were roughly aligned (the aligned condition).
Everyone then answered questions about trust in government in general, and attitudes toward taxes in particular. Unsurprisingly, telling people that they’d paid more into government than they received in return, as I did in the Cost condition, provoked a sharp, negative reaction across all measures. However, being told that one’s government costs and benefits are roughly aligned in value spurs one to be more trusting of how the government uses one’s tax money. The same conclusion can be drawn from the feeling thermometer results. Seeing the Alignability condition increased how people feel about their taxes by about 8.5 percentage points. There is also some evidence that the Alignability condition made people more supportive of higher government spending, even at the cost of additional taxes.
It’s not as if Americans don’t want a good deal. The Benefits condition also moved people to think more positively about their taxes. But, so far as this evidence shows, the effects of the Alignability condition and the Benefits condition are virtually indistinguishable. In both cases, people were told that they’re getting a good deal with their taxes; and in both cases, this led to a surge in support for taxes. Furthermore, while the Alignability condition was able to increase people’s support for increased government spending and taxes, the Benefits condition effect on the same outcome was not statistically significant by conventional standards.
This result is surprising. When it comes to taxes, Americans have been described as wanting “something for nothing,” or a free lunch. Some people surely do want a free lunch. But the allure of a free lunch is no greater than the allure of cost-benefit alignability. Additional experiments further corroborated this finding.
When they evaluate their taxes, people bring a version of consumer fairness with them. Americans do not only want a free lunch. As the saying goes, there’s no such thing. As consumers, they’re willing to pay more when the costs of producing a good are made salient, or when a price increase appears commensurate to perceived costs to the firm. Similarly, when people are led to believe that government costs approximate the value of benefits that government provides, they respond by viewing their taxes more favorably than they would otherwise.
In either case, people are perceiving positive value from the deal itself. Richard Thaler has dubbed this “transaction utility”: That is, people attach utility to the value of the “deal” they perceive themselves to be receiving. This is true when the good itself in question remains constant. When it comes to government, they appreciate the deal they get when they believe they are getting more in value than what they paid in. But they also appreciate getting about the same amount in return as what they paid in. The only thing they don’t like is getting less than what they paid for. That’s a bad deal. Nobody likes those.
I believed that a taxpayer receipt would increase trust in taxing and spending. I was wrong. Though receipts provide people with more information about where their tax money is going, à la Alice Rivlin, they don’t actually make people feel better about their taxes. But by appealing to consumer fairness norms, people’s attitudes about their taxes can change. Maxims from consumer life—“There is no such thing as a free lunch”—have traction in the political realm. For good reason, many Americans have little expectation of receiving free lunches from government. After all, they have little expectation of receiving them elsewhere. Counterintuitive though it may sound, presenting costs and benefits together can have just as powerful effects on attitudes toward taxes as presenting the value of the benefits alone. Sometimes, the effects can be even more powerful.
In her magisterial survey of Americans’ attitudes about taxes, Vanessa Williamson interviewed a man named Daniel, a self-professed political independent, who told her that he “think[s] of taxes as the cost of running the country.” Taxes, in other words, are a cost we bear to receive the services that the country provides. Or, as another one of Williamson’s interview participants—a Democrat named Denise—bluntly put it, “You get the service, you pay for it.” Not everyone shares this view, of course. But as the experiments described here demonstrate, the average American is nonetheless moved to become more supportive of taxes when this maxim is met.
For some, all this will come as a disappointment. We like to think of politics as a domain focused on public concerns. The consumer world, by contrast, should be for our personal, private needs. But while it may be tempting to believe that, on political matters, citizens set aside the small things that occupy them and make sober, rational decisions, the evidence suggests otherwise. It may be further tempting to decry the encroachment of consumer norms into the political realm, and set sharp boundaries between politics and the consumer world.
However well-intentioned, such concerns miss the present empirical reality: The citizen has become a consumer-citizen, whose experiences as consumer have come to shape their political views. To speak of the consumer citizen is to speak of people as they are, not as we might wish them to be. But treating them as they are might bring progressives closer to the policies they desire.