Mitt Romney is in a bit of hot water for comments he made during a closed-door fundraiser about the 47% of Americans who don’t pay federal income taxes.
I’m generally pretty sympathetic to people saying stupid things in closed-door fundraisers, but the whole flap raises an interesting question: Is it really true that 47% of Americans pay no federal income tax? And who are these people? And do they believe that they are victims entitled to health care and housing?
How many people don’t pay federal income tax in the US?
Lots of people. The 47% stat is accurate, as long as you only count federal income taxes. (More than 85% of Americans under 65 pay either income tax, federal payroll tax, or both—and almost all Americans who own land or buy things pay state and local taxes.)
Who are these people?
Many elderly people who live off social security pay no income tax (social security benefits are only taxable if your total income is over $25,000 a year). Only about 25% of Americans over the age of 75 pay federal income tax, but it’s important to remember that most of them did pay federal income tax when they were working.
Also, many young adults pay no income taxes, because they are full-time students or have very low incomes. You can see a chart here that shows that about 30% of 18-year-olds pay federal income tax, while over 65% of people in their 40s do.
People living in poverty are also unlikely to pay federal income taxes. A married couple filing jointly making under $18,700 annually pays no income taxes. But it’s worth noting that in 1996, 99.5% of all nontaxable returns came from people making less than $30,000 a year. Today, that number is closer to 76%.
The fastest growing segment of Americans who pay no tax are those who earn between $75,000 and $100,000 each year. As explained here, there’s been a 12,000% increase in nontaxable returns in this income category thanks to middle income tax cuts and tax credits introduced by both George W. Bush and Barack Obama.
Romney’s central mistake is imagining the data as static. In 2000, for instance, I paid no federal income tax. This doesn’t mean that I am a drain on the system: In fact, I have paid lots of federal income tax in other years. 2000 just happened to be a weird year, because I had a lot of health care expenses and not very much income.
This is the case for most Americans: Romney’s comments implied that the same 47% of Americans pay no federal income taxes every year. In fact, the members of that 47% are constantly changing as people age into and out of the work force.
Do these people believe that they are victims entitled to health care and housing?The most incendiary remark Governor Romney made was, “There are 47% who are with him, who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care of them, who believe that they are entitled to healthcare, to food, to housing, to you-name-it.”In fact, the number of Americans who feel the government should provide health care and food to those in need is much higher than 47%. 76% of Americans (including a majority of Republicans) favor medicaid, the program that offers health care to the poor. A majority of Americans also believe medicare, the program that offers health care to the elderly, is worth its cost. And more than three quarters of Americans support the federal food stamp program that provides food to low-income and elderly people.
Cutting subsidies from Amtrak and Planned Parenthood is the equivalent of President Obama promising to close loopholes for corporate jet owners. It’s red meat for the base, but a rounding error in context of the budget.
Romney’s real savings come in the next section. He’ll “send Medicaid back to the states and cap that program’s rate of growth,” and then “do the same for other programs, like food stamps, housing subsidies and job training.”
Sending the programs back to the states is a red herring. The key bit for deficit reduction is capping their rates of growth. Which is to say, cutting their rates of growth. Which is to say, cutting them.
What Romney is essentially proposing to do is finance a massive tax cut by cutting Medicaid, food stamps, housing subsidies and job training. In other words, the neediest Americans — and, to a lesser degree, federal workers — will be financing a massive tax cut.
President Obama will renew his call for higher taxes on the rich on Tuesday, and he has invited Warren Buffett’s secretary to Washington to make his point.
Debbie Bosanek, longtime secretary to the Oracle of Omaha, will take in the State of the Union as a guest of the White House.
White House Communications Director Dan Pfeiffer confirmed Bosanek will join the first lady in her box in a post on Twitter.
Why Buffett’s secretary?
In some ways, she is the inspiration for Obama’s Buffett Rule, a proposed guideline to ensure that the wealthiest do not pay a lower overall tax rate than those who earn substantially less money.
“[Last year] what I paid was only 17.4% of my taxable income — and that’s actually a lower percentage than what was paid by any of the other 20 people in our office,” Buffett wrote in a New York Times op-ed last year.
Why? For most people, wages make up a majority of their income, so when they get a raise their average tax rate may go up.
But millionaires — and in Buffett’s case, billionaires — typically have several sources of income, some of which are taxed at lower rates.
Mitt Romney, in one of the most telling, jaw-dropping exchanges of the night at the South Carolina Republican CNN Debate.
Let me reiterate: Romney says if he releases his tax returns now, he may not beat Barack Obama. If he thinks that will quash speculation about his taxes, Romney’s sorely mistaken.
Rep. Steve LaTourette (R) of Ohio, who signed the Americans for Tax Reform pledge to never raise taxes in 1994.
The Christian Science Monitor’s Gail Russell Chaddock writes about increasingly strident Congressional criticism of the tax pledge.
This could be construed as a hopeful sign for the deficit supercommittee, which has been hung up on whether increased tax revenue.
Here’s another zinger from Democrat Rep. Rob Andrews (N.J.), one of the few Democrats who ever signed the pledge.
“I signed the pledge in 1992, and I understood it to mean that for the next term, if I were reelected, I would not vote to raise taxes,” he says. “I honored that pledge.”
“But I never renewed it. I never considered it to be like my marriage vows, I’m married to Camille Andrews not Grover Norquist. I promised her to be faithful until death do us part, and I mean it. I did not promise him to oppose tax increases until death do us part.”