Tuesday, September 18, 2012

The 47 Percent Reality Versus Romney's Fantasy

Just who makes up the 47 percent of households that pay no federal income tax? Mitt Romney maligned them as refusing to "take personal responsibility and care for their lives." The Tax Policy Center has the breakdown and Brad Plumer provides analysis in the Washington Post. The reality does not correspond to Romney's fantasy of spoiled freeloaders:

28.3 percent of households pay no federal income tax, but they do pay the payroll taxes for Social Security and Medicare. That means they don’t need Mitt Romney to convince them to “take personal responsibility and care for their lives.” They already have jobs.

Most of the households in this group don’t pay any federal income tax because they qualify for enough deductions that their income tax liability has shrunk to zero. See this Tax Policy Center report for more, which gives an example of “a couple with two children earning less than $26,400. They get an $11,600 standard deduction and four exemptions of $3,700, and that takes their liability to zero.” Indeed, it’s worth noting that many of these deductions and credits were part of the 2001 and 2003 Bush tax cuts, which Romney wants to extend.

10.3 percent of households pay no federal income tax because they’re retired and elderly. Many retirees aren’t taxed on their Social Security benefits, which they earned by paying into the system over many years. If Mitt Romney secretly thinks that these households are all irresponsible freeloaders, he has a weird way of showing it, as he keeps insisting that he doesn’t want to cut Medicare or Social Security benefits for those over the age of 65.

— That leaves 6.9 percent of households which are non-elderly and have incomes less than $20,000 per year and aren’t paying the payroll tax. These poorer households pay neither income taxes nor payroll taxes. Perhaps Romney thinks that they should all pay more in federal taxes. It’s hard to say. But this is also a much smaller fraction of Americans.


Michael The Molar Maven said...

Romney's comments reminded me of a time I called in to a radio talk show after another caller complained that the previous year he had to pay over $300,000 in federal taxes. The host spent the next few minutes commiserating with the caller expressing what I felt was undeserved sympathy. He also praised this "job creator", unitl, that is, when asked how many were employed in his company, the caller said he had, in fact, no other employees other than himself.

I called the show to ask for that other caller's contact information. I wanted to know how he did it. I'd love to have to pay $300,000 in taxes. I was told that I missed the point.

Did I?

Jeff Tone said...

You made the point!