wedrifid comments on Optimal Employment - Less Wrong

60 Post author: Louie 31 January 2011 12:50PM

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Comment author: wedrifid 31 January 2011 07:42:30PM *  4 points [-]

Ostrich Effect - Regardless of income, the average American ends up paying close to 40% in taxes yet consistently self-reports as paying only 3%.

Huh? You haven't left off a zero there? How can someone think they are paying 3%?

Comment author: SilasBarta 31 January 2011 07:59:30PM 6 points [-]

Because of the huge fraction of mouthbreathers who, without pause, respond to such questions with the brilliant, "I didn't pay any taxes this year. I got some back!"

(That is, they think they had a net gain of money because they over-deducted from their paycheck that year, and the government returned the excess.)

Comment author: lunchbox 01 February 2011 07:08:21PM 4 points [-]

Even considering that, the 3% figure still seems wildly implausible. This would require something like 90% of the population thinking they pay 0% taxes, and the remaining 10% thinking they pay 30% taxes (which is still an underestimate).

The PDF that Louie linked to doesn't explain what the numbers mean. Surely there would be lots of articles about this epidemic of grossly underestimating taxes. Can anyone provide more evidence?

Comment author: SilasBarta 02 February 2011 07:40:53PM *  2 points [-]

True. A few other possible factors:

  • Consider the impact of interpreting "I got some back" answers as being negative entries in the summation (though I hope the survey would put up a big asterisk about this when reporting the results!).
  • People took the question as being about federal income taxes, and that value is (incorrecty) compared to all taxes at all levels: social security taxes, state sales taxes, etc.
Comment author: thomblake 31 January 2011 09:28:40PM 4 points [-]

FWIW, when I wasn't making much money, my income tax was 0, and tax credits (such as EIC) meant that I was returned more money than was deducted.

Comment author: SilasBarta 31 January 2011 09:40:26PM 1 point [-]

Even after accounting for SS and Medicare taxes? (IIRC, student workers don't have to pay SS.)

Comment author: thomblake 31 January 2011 09:55:27PM *  1 point [-]

I'm not sure about those, but it would have been close some years. If I'm not mistaken (source), SS and Medicare are something like 7.6%, and looking at a rather high-paying year out of the bunch I paid about negative 3.6% in taxes. I probably did better than that in years with less money.

Comment author: wedrifid 31 January 2011 09:25:56PM 4 points [-]

But, but... companies actually employ these people? I hope they don't let them man the cash register!

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