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Wednesday, December 8, 2010

Americans and the Obama Tax Cut Compromise

Where do Americans stand on the tentative agreement reached between President Obama and Republican leaders on the expiring Bush era tax cuts? I have not seen new public opinion research data conducted entirely since Obama's announcement Monday night. But we did ask Americans questions about elements of the agreement over the weekend. Coupled with previous survey results, we can derive a pretty good picture of where the public stands.

The most important thing to recognize: Americans want some type of action taken before the end of the year to avoid all Bush era tax cuts expiring. Americans do not want the tax cuts to go away as a result of the inability of the warring factions in Washington to agree on what to do about them.

I base this conclusion on polling conducted by a number of different organizations. No survey result that I am aware of shows anything but a small minority of Americans opting for a “let all cuts expire” response -- regardless of what the alternatives are. 

Given that it appears unacceptable to Americans to let all of the Bush era tax cuts expire, the issue becomes one of determining which of various suggestions should be followed that would avoid that possibility.

The data suggest that given options, Americans would tilt toward allowing tax cuts to remain for all but the wealthy. This is shown in our Gallup data, and in other polls (see here and here, as examples). Most Americans make under $250,000 a year, the minimum definition of “wealthy” used by President Obama and in most question wordings. It is thus not surprising to find that Americans are OK with higher taxes for these higher-income families.

There is at least one exception to the finding that Americans tilt toward an option that taxes be increased on the wealthy. A Nov. 11-15 NBC News/The Wall Street Journal survey gave respondents four choices, including eliminating all tax cuts permanently, eliminating tax cuts just for those making more than $250,000, keeping the tax cuts for all for another “year to three years,” or keeping the tax cuts in place for all permanently. The results showed that 46% chose one of the two alternatives involving keeping the tax cuts for everyone -- either for one to three years or permanently. A lower percentage, 39%, chose the alternative to eliminate the tax cuts for those earning more than $250,000. (Only 10% opted to let the tax cuts expire altogether.) One issue with this question is that the $250,000+ alternative did not include a time frame. Each of the other three alternatives read to respondents did -- either "permanently" or "another year to three years." This could have made the $250,000 alternative less attractive.

At any rate, it appears that the alternative of keeping tax cuts for most, but not for the wealthy, is in many polls at least slightly more attractive than keeping them in place for all.  (Many of these polls, however, don't specify whether the options would be permanent or temporary, which clouds the interpretation somewhat).

At current time, however, those choices are not the options on the table.  The specific proposition agreed to tentatively by Obama and Republican leaders is for an agreement that would extend all tax cuts for another two years.  We tested just this proposition over the weekend. Our Gallup question asked in referendum style if the respondent would vote for or against a law that would “extend the federal income tax cuts passed in 2001 and 2003 for all Americans for two years.” We found 66% would vote for this proposition, while 29% would vote against.

This referendum style question deliberately did not provide complex and multiple options for the public to consider. It simply outlined one specific proposition and asked the public how it would vote on it -- either up or down. And a majority of Americans appeared to be OK with it. 

As my colleague Lydia Saad said in her write-up, " . . . the results of the new question suggest that, while the compromise position on taxes may not be their ideal, most Americans would support congressional passage of it."

In this situation, it is possible to argue that President Obama is, in fact, following the people’s will. He has stated that his first preference would be to allow the tax cuts to remain for most Americans but not the wealthy. But, he said, given that this does not appear to be possible, he settled on letting the tax cuts continue for all as opposed to the alternative of letting them all expire. As The Washington Post said in its editorial about what it typified as an "odious" tax deal: "The Democrats should vote for this deal, because it is the only one they are going to get. "

It is important to note that the announced agreement involves compromise. From the general public’s perspective, this is a good thing. The public tilts toward the view that elected representatives should compromise principles in order to get things done. Of course, it’s easier to favor compromise when it favors one’s position that when it doesn’t. In this case, although Republicans are the least likely to favor compromise in general, they most strongly support the proposed solution of extending the tax cuts for two years. Democrats, who favor compromise in principle more than Republicans, are least in favor of this particular solution. That's the nature of politics.

All compromise involves somebody moving away from dearly held positions. Those who feel most strongly about those positions are the ones who will protest the compromise the most. In this instance, liberal Democrats are protesting the loudest on the issue of extending the tax cuts for everyone regardless of income. Clearly, however, the public on average comes down on the side of extending the tax cuts for all if that is the specific proposition on the table -- as it appears it is at this moment.

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