This Is How People Really Feel About Paying Taxes

Tracy Alloway (0:11)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:16)

And I'm Joe Weisenthal.

Tracy Alloway (0:18)

Joe, let's see. I know we keep putting caveats on all our episodes recently, but we are recording this with less than a week to go before the presidential election in the US.

Joe Weisenthal (0:30)

Yeah, just five days to go.

Tracy Alloway (0:32)

Yeah.

Joe Weisenthal (0:33)

So the whole world could be different. By the time people are listening to this, this whole episode could just be like this weird time capsule from some normal time, or I guess not really normal these days, but from some totally different time.

So hello from the past.

Tracy Alloway (0:48)

So on that note, everyone in DC is getting ready for the election. And at the same time, you can just imagine there are rooms filled with people, with policy wonks who are trying to figure out what policy might look like under both another four years of Trump and also potentially four years of Biden.

Joe Weisenthal (1:10)

Yeah. So I think like, you know, the first order of business, most people assume if they're say a Biden administration, it would be some sort of major spending stimulus, sort of a heavy running up the deficit in order to get the economy back to trend or accelerate the return to full employment.

Then, you know, that's the kind of thing that people imagine could get passed in February. But if, you know, we're talking about a Biden administration or any Democratic administration in the future, then there would also be further policy questions beyond that. And one of those, of course, would be the future of the tax system, which was reformed in the first Trump administration.

Tracy Alloway (1:48)

Yeah, I mean, taxes have been a big talking point, you know, ever since Trump came in in 2016 and did a lot of stuff, including reducing the corporate tax rate. But the Biden tax program is also getting a lot of attention at the moment because he's talking about doing a tax hike for very wealthy individuals. And also, I think talking a little bit about maybe upping or imposing tax on capital gains. So clearly, this is all in focus.

Death in taxes are inevitable. The fact that Odd Lots would do an episode on taxes, I suppose, is also inevitable. But I think one really interesting thing when it comes to tax policy is, you know, there is this idea among economists and among policymakers that they're trying to balance a number of things here. You know, they're trying to balance, I guess you would say, the efficiency costs of taxes with their benefits. So, you know, making society more equal, bringing in revenue for the government, obviously. And there's a tendency to look at that in a really rational way.

But as hopefully a lot of people know already, the average person on the street might have different ideas about the drawbacks or the benefits of taxes, depending on their personal position, right? They're not necessarily thinking about it rationally.

Joe Weisenthal (3:17)

No, people don't necessarily think about taxes rationally other than most people don't like paying them. And most people, all else equal, would like to pay less.

But I do think, you know, it's interesting, and we'll get into this in the conversation. I have a, I feel like the salience of taxes as a political issue has gone down. There are a lot of people for whom cutting taxes, you know, is this huge mantra for years. It was probably one of the defining elements of the GOP in the US is that they're the party of tax cuts. And of course Trump did cut taxes, but it feels like, you know, with everything else going on these days, we have so many cultural fights and COVID and other question, the salience of the tax number, which has already been cut a lot, feels like it has a less political resonance, but we'll discuss that with our guests. Maybe that's just my bias. I don't know. Who knows if that's actually true.

Tracy Alloway (4:08)

No, I think you're right.

Joe Weisenthal (4:10)

It just feels like there aren't like, you know, like tax cut Republicans. It used to just be such a thing. And it feels like the people have sort of moved on, but who knows?

Tracy Alloway (4:21)

The good old days when the only thing people were really getting worked up about was higher taxes.

Joe Weisenthal (4:26)

Yeah, easier times.

Tracy Alloway (4:27)

A simpler time.

All right, well, that brings us quite nicely to our guest for this episode, I suppose. So we have Stefanie Stantcheva. She's a professor of economics over at Harvard. She's done a lot of really interesting research on all types of policy, but specifically she did a very good paper about taxes recently.