Saturday, September 29, 2012

Who doesn't pay income tax?

One thing that disturbs me about the 47% rhetoric - which Romney certainly didn't invent - is that it's based on dividing Americans into Us vs. Them.

In this narrative, there are makers vs. takers, producers vs. parasites. These are descriptions of who someone is, their essential nature. The makers and the producers work hard and always take care of themselves. The takers and the parasites are, by their nature, lazy moochers who will always have their hands out for their government checks.

In fact, getting a government check isn't something that's a permanent condition for the vast majority of Americans who get one. Most of us get a government check at some point in our lives. "Government checks" include student loans, veterans benefits, disability payments, social security benefits, disaster assistance, medicare.

The vast majority of Americans work and pay taxes for most of their adult lives to pay for those benefits. But from year to year, our circumstances change. The economy is good, the economy is bad. We find a job, we get laid off. We have a baby or get seriously ill. At some point we either die or get old.

Most of the children who get free lunches while they're in school grow up, get a job and pay taxes that in turn provide free lunches for another generation of poor children. Most people who collect unemployment benefits do so only until they find another job. The very old get Medicaid to help pay for their nursing home care after a lifetime of work and paying taxes.

So who doesn't pay federal income taxes?

The key point in looking at this graph is that it shows a snapshot of who's not paying federal income taxes at one point in time.

People who don't pay income taxes are:

On social security - 10.3% of Americans pay no federal income taxes because they are elderly, drawing a Social Security "government check," and most, if not all (depending on your total income) of Social Security benefits are non-taxable income. But of course, they worked and paid taxes before they retired.

Romney's view of retired Americans on social security: " All right, there are 47 percent who are with him, who are dependent upon government, who believe that they are victims . . ."

Veterans - Disability pensions for combat-related injuries are not subject to federal income tax. Veteran's education benefits aren't either. I suspect that most of my students who are veterans don't pay income tax because those education benefits are the biggest part of their income. Most have families, are full-time students, working hard to get the education they need to do well in a new career now that they're out of the military. Many were wounded in Iraq or Afghanistan.

Ordinary military pensions are taxable, but like many retired people on social security, between their retirement income being lower than what they were making when they were working and the extra deduction for being over 65, they don't owe any income tax.

Romney's view of veterans: " All right, there are 47 percent . . . who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it. That that’s an entitlement. And the government should give it to them."

Deployed troops - pay received while serving in a combat zone is non-taxable. Romney's view of our troops serving in a war: " . . . my job is not to worry about those people. I’ll never convince them they should take personal responsibility . . ."

Disabled people - Supplemental Security Income is not taxable, Social Security Disability Insurance is covered by the same rules as regular social security benefits, so most people on Social Security Disability Insurance won't have a high enough income to have to pay income tax. About 5% of Americans, receive SSDI or SSI, so they're most of the "Nonelderly, income under $20,000" in the chart above.

Romney's view of disabled Americans: "All right, there are 47 percent . . . who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them . . ."

Working but don't owe income tax - 28.3% of Americans pay no federal income taxes, but they do pay Social Security (FICA) and Medicare tax, so that tells us that they have a job or are self-employed. More than a quarter of all Americans are working and paying federal taxes, they're just not paying federal income taxes.

Why don't these working Americans - more than half of Mitt's 47% - pay federal income taxes? For most of them it's because the EITC (Earned Income Tax Credit) and the Child Tax Credit zeroes out the federal income taxes they would otherwise owe.

For millions of American families, this is a common story: They have a baby, one parent - usually mom - quits her job and stays home with the baby for a year or two, then she goes back to work. While they're living on one income, the family doesn't owe that much in income tax and then the EITC and the Child Tax Credit wipes that out. And most Americans who claim the Earned Income Tax Credit only claim it for one or two years. Source

Romney's view of working class and middle class families with children: ". . . there are 47 percent . . . who pay no income tax... my job is not to worry about those people. I’ll never convince them they should take personal responsibility and care for their lives."

And of course all of these Americans pay all kinds of state and local taxes - sales taxes, property taxes, gas taxes, etc.

So who are Romney's 47%? This is who they are:



The thing is Romney didn't come up with this 47% nonsense himself. Right wing bloggers and talk show hosts have been going on about "Half of Americans don't pay (income) taxes!" for at least the past year that I've been hearing it. We heard it at the Republican primary debates and on the campaign trail.

There were demands that all of these moochers should have to pay taxes so they would have "skin in the game."

Right. Apparently this is how Republicans see tax fairness:

Old people on social security? Tax 'em! Honor our troops injured in war? Tax 'em! Fighting in a combat zone? Tax 'em! Disabled people struggling to get by? Tax 'em! Stay home with your kids while they're small? You need more taxes! The maid who cleans your motel room for minimum wage, the single mom with two kids? Tax her!

Given his description of the 47% of Americans who don't pay income tax in a given year, you'd think he thinks that they're all on welfare. Well, as I said before, I guess that depends on your definition of "welfare." Unlike Mitt, I think most Americans don't think social security benefits, combat pay, veterans benefits, disability payments, etc. are "welfare." Or maybe he knows very well that that's not true and he's just lying and pandering to his wealthy donors.

But I think he really doesn't know. And not just because he's so rich that he's out of touch. (Though there is that - see the heart-warming story of how he and Ann struggled during their student days when they had to - gasp! -sell some stock that their parents gave them to get by.)

No, I think what ails him is a combination of narcissism and gullibility. He just believes whatever talking points the TV talking heads and radio talk show hosts are repeating at the moment. He really has no curiosity about the vast majority of Americans. He just doesn't care enough to give any thought to why 47% of Americans do not pay income taxes in a particular year. He thinks they're parasites. It's their nature. He has no idea that most of them paid income tax in the past and will again in the future. Not to mention all of the other taxes (payroll taxes, sales taxes, property taxes, etc.) they pay.

But can we afford a president who has no idea why 47% of Americans don't pay income taxes?

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