If Ponnuru’s regular takedowns of this myth at NR and Bloomberg haven’t been enough to convince you, please go read this excellent piece from Ezra Klein. And please, please stop with the 47% BS. I have not been above the poverty line for a single year of my adult life and last year I paid more taxes – in terms of what percentage of my income went to taxes – than Romney, the man who would become the wealthiest president we’ve had since George Washington, if elected. This isn’t partisan spin, it isn’t me bashing him because I want to score political points for my guy (I don’t have a guy, remember). It’s just the mathematic truth.
Then again, what do I know, I’m just one of those 47% who isn’t interested in taking responsibility for myself and wants to mooch off the government.
This entire conversation is the result of a (largely successful) effort to redefine the debate over taxes from “how much in taxes do you pay” to “how much in federal income taxes do you pay?” This is good framing if you want to cut taxes on the rich. It’s bad framing if you want to have even a basic understanding of who pays how much in taxes.
There’s a reason some would prefer that more limited conversation. For most Americans, payroll and state and local taxes make up the majority of their tax bill. The federal income tax, by contrast, is our most progressive tax — it’s the tax we’ve designed to place the heaviest burden on the rich while bypassing the poor. And we’ve done that, again, because the working class is already paying a fairly high tax bill through payroll and state and local taxes.
But most people don’t know very much about the tax code. And the federal income tax is still our most famous tax. So when they hear that half of Americans aren’t paying federal income taxes, they’re outraged — even if they’re among the folks who have a net negative tax burden! After all, they know they’re paying taxes, and there’s no reason for normal human beings to assume that the taxes getting taken out of their paycheck every week and some of the taxes they pay at the end of the year aren’t classified as “federal income taxes.”
Confining the discussion to the federal income tax plays another role, too: It makes the tax code look much more progressive than it actually is.
Take someone who makes $4 million dollars a year and someone who makes $40,000 a year. The person making $4 million dollars, assuming he’s not doing some Romney-esque planning, is paying a 35 percent tax on most of that money. The person making $40,000 is probably paying no income tax at all. So that makes the system look really unfair to the rich guy.
That’s the basic analysis of the 47 percent line. And it’s a basic analysis that serves a purpose: It makes further tax cuts for the rich sound more reasonable.
But what if we did the same thing for the payroll tax? Remember, the payroll tax only applies to first $110,100 or so, our rich friends is only paying payroll taxes on 2.7 percent of his income. The guy making $40,000? He’s paying payroll taxes on every dollar of his income. Now who’s not getting a fair shake?
More:
But here is really the only tax graph you need: It’s total tax burden by income group. And as you’ll see, every income group is paying something, and the rich aren’t paying much more, as a percentage of their incomes, then the middle class.
That’s really what the American tax system looks like: Not 47 percent paying nothing, but everybody paying something, and most Americans paying between 25 percent and 30 percent of their income — which is, by the way, a lot more the 13.9 percent Mitt Romney paid in 2011*.
When politicians try to convince you that half of Americans aren’t really paying taxes, it’s usually because the real data undermines their preferred policies. For instance, you wouldn’t look at these numbers and think tax cuts for the rich need to be a huge priority. And that’s one reason people who want more tax cuts for the rich don’t like to show you these numbers.
* Romney’s 13.9 percent rate only counts his federal taxes. He hasn’t released his state and local returns for 2011, so we can’t say how that would change his total tax rate. But given the state and local averages for someone in his income group, it’s likely to remain well below the 25-30 percent that is typical.
This article is based on the propaganda of deception (political lies) and reflects general confusion about insurance (SS and Medicare/Medicaid) payroll withholdings by considering them taxes. The elderly, the disable, and the low-income working citizens should be protected by a reformed tax system that considers payroll withholding (currently defined as insurance) as taxes (implied by the current Supreme Court decision) and tax everyone equally with a lower combined tax rate.
Rod, I’ll believe that Social Security and Medicare/Medicaid withholdings aren’t taxes as soon as the government stops treating them like taxes.
http://www.starkman.com/hippo/history/bryan.shtml
I’m generally in agree with Ramesh and Ezra – I think Mitt’s comments are problematic for a number of reasons – but couldn’t the argument be made that SS and Medicare are different from income and other taxes in that they’re more like a retirement account than a tax. The money withheld by SS and Medicare is being used for a specific purpose – to take care of people in their old age – and your contributions to those systems are what insures you will be taken care of in your old age. (At least this is how it’s supposed to work in principle.)
The income and other taxes are all dumped into the general revenue and not credited to anyone in particular. On the other hand, my contributions to SS and Medicare are being counted and will accrue to me when I retire (to some degree or another, obviously no one gets out exactly what they put in).
If we means tested SS and Medicare I’d then consider them more like a regular tax and less like a retirement account.
your contributions to those systems are what insures you will be taken care of in your old age.
Your contributions to Medicare and Social Security fund current benefits, not your future benefits. They’re nothing at all like “retirement accounts.” They’re taxes that fund single-pool social insurance. Redistribution, in other words.
On the other hand, my contributions to SS and Medicare are being counted and will accrue to me when I retire (to some degree or another, obviously no one gets out exactly what they put in).
No, they’re not. Your contributions do not accrue.
JAKE:
You and I both call ourselves conservatives. In the 2012 presidential election you have chosen to oppose Romney who, like him or not, is our only “conservative” candidate. I am not enthusiastic about Romney and share some of your criticisms about him. Peggy Noonan articulated my grievance this week:
“It’s time to admit the Romney campaign is an incompetent one. It’s not big, it’s not brave, it’s not thoughtfully tackling great issues. It’s always been too small for the moment.”
Despite these flaws, I will still vote for Romney in November because for this conservative the big issue, as Noonan writes, concerns “how we view government, what we want from it, what we need, what it rightly asks of us, what it wrongly demands of us.” Of our two choices in this election, Romney’s vision of a limited government, which permits the “little platoons” of society to flourish without excessive regulation, comports with my conservatism more than Obama’s ambition for an ever-growing and ever-intrusive government, which chokes the life out of those little platoons.
On Romney’s controversial remarks, you say “please stop with the 47% BS.” But is it really BS? There is a distressing trend of dependency on the government. The WSJ editorial page made a good suggestion for what Romney should have say:
Christopher – See, this is where we disagree. I just don’t see Romney as a conservative. He hasn’t said anything lately that makes me think he’s going to work for the advancement of small communities and local places. Instead, he will continue to support tax cuts that we simply can’t afford, wars we oughtn’t be fighting, and companies that don’t help local communities and local places.
As far as the 47% comment goes… a) It’s misleading b/c it’s 47% who don’t pay income tax and who aren’t paying it largely b/c of Republican policies. It’s not 47% of pro-Democrat free loaders that the Dems are enabling. Most of that 47% is Romney’s base and most of them aren’t paying taxes b/c of things Reagan and both Bushes did. b) The issue with that speech really isn’t the 47% thing anyway, as deceptive as that was. He and Ryan have been lying through their teeth – Ryan especially – for most of this campaign. The issue is that he says anyone who isn’t paying income tax doesn’t want to take responsibility for their own life or choices. That isn’t me reading between the lines, those are his words.
At this point, it really isn’t a Republican thing for me with Romney. I’ll probably be voting for Jeff Fortenberry for congress and I’m still undecided on our senate race, but if I had to guess today, I’d probably vote for Deb Fischer. So I’m going to vote for some Republicans. But Romney… man, what is there about him that is worth supporting?
As far as the WSJ excerpt – I think that sounds great. I don’t think Romney believes a word of it – he’s 100% on board with the makers-takers line – but I think what the WSJ has outlined sounds really good.