Sign in Subscribe
Kerry, John

The Elusive Middle Ground: Understanding the Disconnect between Tax Cuts and Tax Policy in the 2004 US Presidential Election

Strategic Insights

— 2 min read

As the 2004 US presidential election campaign reached its climax, Democratic candidate John Kerry's attempts to persuade Americans that his tax plans would benefit the middle class fell short. Despite his promise to roll back tax cuts on the richest 2 per cent to fund new tax breaks for the middle class, Kerry struggled to gain traction with voters, with many Americans continuing to opt for Republican candidate George W. Bush on tax policy. But what accounts for this disconnect between Kerry's tax proposals and the American people's perceptions of them?

Key Takeaways:

  • A US survey by Time Magazine in 2000 found that 19 per cent of respondents believed they were in the top 1 per cent of earners, and another 19 per cent believed they would be one day, highlighting widespread delusions among Americans about their place in the income pecking order.
  • Research by Larry Bartels, an economist at Princeton, suggests that few voters have fully grasped the extent to which the Bush tax cuts have primarily benefited the wealthy, with Citizens for Tax Justice estimating that over a decade the cuts are worth $1,861bn, with $689bn going to the wealthiest 1 per cent.
  • A Gallup poll published this year found that two-thirds of respondents said "upper-income earners" paid too little tax, and only a quarter said they paid their fair share, further illustrating the American public's misunderstanding of tax policy.
  • Misunderstandings about taxation are evident in the estate tax, or "death tax", with half of Americans believing most families have to pay the tax, and two-thirds thinking they will one day be hit by the tax, despite the fact that only 2 per cent of people pass on their estates each year.
  • The Bush tax cuts, which were made "visible" and "politically effective" through rebate cheques, have contributed to the American public's perception that tax cuts are beneficial, regardless of who receives them.
  • Mr. Kerry is facing a credibility problem, with half of voters surveyed in a CBS News poll saying they would pay higher taxes under him, despite polls suggesting he is more trusted as a steward of the economy.

Statistics:

  • 19 per cent of respondents to a US survey by Time Magazine in 2000 believed they were in the top 1 per cent of earners.
  • 19 per cent believed they would be in the top 1 per cent of earners one day.
  • The Bush tax cuts are worth $1,861bn over a decade, with $689bn going to the wealthiest 1 per cent.
  • Only 2 per cent of people pass on their estates each year, making the estate tax a relatively rare occurrence.
  • 80 per cent of Americans favour eliminating the estate tax, despite its being a progressive tax.
  • A Gallup poll published this year found that two-thirds of respondents said "upper-income earners" paid too little tax, and only a quarter said they paid their fair share.
  • Half of voters surveyed in a CBS News poll said they would pay higher taxes under Mr. Kerry.

Sources:

  • Time Magazine, 2000 US survey
  • Larry Bartels, Princeton economist
  • Citizens for Tax Justice, 2004
  • Gallup poll, 2004
  • National Public Radio, Kaiser Foundation, and Harvard's Kennedy School, 2002 survey
  • American Enterprise Institute, Veronique de Rugy
  • University of Michigan, Joel Slemrod
  • Cato, John Samples
  • CNN, post-debate poll
  • CBS News, poll, October 2004

Read more