April means Tax Day, a yearly reminder that most people don’t like our tax code. As a recent Tax Foundation poll found, people don’t understand it either. With a looming tax battle on Capitol Hill, the need for tax policy education has never been higher. We shouldn’t let tax education end with Tax Day.
The public is wrapping up taxes this week, but according to the latest poll, over 61% of people do not know or are not sure of basic concepts related to income tax filing, and over half do not know how tax brackets work. (They shouldn’t feel bad. Albert Einstein thought the income tax was the hardest thing in the world to understand.)
The national poll, conducted by the highly respected Public Policy Polling group, surveyed over 2,700 U.S. taxpayers of all political stripes and income levels. It revealed only 48% of respondents knew tax refunds were nothing to celebrate and that 64% did not know that a $1,000 tax credit is more valuable than a $1,000 deduction.
This is an indictment not of the public’s intelligence but of the tax code’s complexity and the struggles educators face to teach tax literacy. Unfortunately, these misunderstandings could not only lead to poor financial decision-making, but they also influence people’s views of how the tax code should be reformed.
Consider the policy of raising taxes on high earners. Your opinion is likely to be informed by your perception of the current distribution of income taxes. For example, 54% of respondents want the rich to pay more in taxes, yet three-quarters did not know how much the top 1% paid. In fact, nearly a quarter of respondents thought the top 1% only paid 1% of the country’s income taxes. (In reality, the top 1% paid 45.8% of all income taxes in 2021 despite its share of the income only being 26.3%.) There’s a reason the slogan “the rich don’t pay their fair share” is so pervasive.
Without knowledge of the tax code and current tax burdens, it’s easy to form a distorted picture of the system. While the overwhelming majority of taxpayers think the tax code is unfair, is overly complex, and needs reform, knowing how to reform the system requires understanding the system.
And with a massive tax battle approaching on Capitol Hill, the need for tax policy education has never been higher.
Unless Congress acts, most people are in for a tax hike at the end of 2025 when major parts of the 2017 Tax Cuts and Jobs Act are set to expire. The TCJA reduced average tax burdens for all income levels through lower income tax rates, a higher child tax credit, and a larger standard deduction, among numerous other changes. It was the most significant overhaul of our tax code in a generation, and if the tax cuts are allowed to expire, most people will feel the effects: either through less money in their pockets or fewer jobs to choose from — or both. For example, a single worker with no children making $75,000 per year would see a tax increase of $1,700. And as the survey shows, most people already think their own taxes are too high.
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But whether or not Congress extends the law, or how, is an uphill battle. Washington has historically high debt and deficits to contend with, and no one knows what the political makeup of the House or Senate will be in 2025. Difficult decisions will need to be made. If people want their voices to be heard during this debate, understanding our tax code is a must.
The public deserves better tax education, but it also deserves a tax code that is simple and easy to understand in the first place. Tax literacy shouldn’t be exclusive to April. Staying informed on how our tax code and how tax policy debates work will lead to better tax policy.
Zoe Callaway is the director of education at the Tax Foundation, a nonpartisan tax policy think tank in Washington, D.C.