Once, just once-I’d like to tear down some really stupid myths about taxes. The one big one I’d like to put to bed once and for all is the line you hear repeated over and over by people who should know better, that 48% of Americans do not pay taxes.
It is just not true.
Like most of the things that the Teabaggers are whining angry about, the idea that almost 50% percent of Americans don’t pay any taxes rests on a half truth-presented out of context. When you fill in the rest of the blocks, the story comes out a lot different.
However, telling that part does not fit the narrative: Namely that the country is divided between givers and takers of wealth. Workers vs freeloaders. Its a key part of the Teabagger back story: “we are better than you.”
Except-if they took the time and effort to look deeper, they would find that Glenn Beck and the other Fox News cheerleaders did not let them in on the whole story.
All numbers from now on come from the Tax Policy.org
Lets start with the macro numbers shall we?
In 2009 a total of 151 million tax units will be filing some sort of tax return. ( That definition excludes individuals who are filed as dependents of other tax units-like children of tax payers.)
Of that number, it is true, 43% have an income tax liability of zero. That is the number that the rabid folks in the park have glommed onto-and in part shaped their outrage around. Sounds good doesn’t it? “43% of all Americans don’t pay any taxes”-something to be mad about.
Except it does not tell the whole story, and if anything it should not serve, as it is so often done, as an indictment of the worth and character of the individuals who fall in that 43%-than as an example of the law of unintended consequences- of well meaning tax law provisions balanced against wages that have been essentially flat lined for the past ten years. These are the “lucky duckies” that the Wall Street Journal has been decrying for some 7 years.
The problem with this narrow view of taxpaying is that the federal income tax is only one of several taxes Americans pay. Other taxes, like excise taxes, sales taxes, and especially the payroll tax (a.k.a. FICA), are not refunded or zeroed out. They get paid regardless of ones standing on the income graph. If you include payroll taxes in that total number of tax units computation I mentioned earlier, the percentage of people with zero income tax or payroll tax drops to 11.6%.
And that does not include state taxes-or sales tax.
Furthermore, the tax protestors have neglected to tell you an important piece of economic demography: 90% of those with zero tax liability made less than 25,000 dollars cash income last year. In a family of four, factoring in both the poverty threshold of 21, 800 and the income tax entry level of 26,000 ( before taking the earned income tax credit), I’m not so sure they have a lot to brag about. The popular number of a person making 44,900 paying no income taxes is only valid for a filer who can take Child Tax credits on two children and an earned income tax credit. A single filer, has already jumped on board the taxpayer train a long time ago.
It’s also worth noting that for at least the last 50 years, the “non-income tax taxpaying” numbers were generally in the neighborhood of 25-28%, and it was only in the last ten years that they really jumped up. The reason for the jump? Congress and the Bush administration fell in love with the idea of tax refundable credits. The Bush tax cuts increased the ranks of those with zero or negative liability, and many of the tax credits-however well intentioned- made the deduction threshold much higher than it was at the beginning of the decade. Tax credits were aimed at everything from children and college students to hybrid cars and homebuyers. In the same period, however, incomes of the top 1% of taxpayers jumped 200%. How about some grass roots outrage about that? If incomes had steadily increased across the board the “non tax paying” percentage might have stayed at 28% or less. For most of us though-they didn’t climb any near that amount.
Now none of this means that the tax code does not need to be simplified. It took a lot of research to pull out a lot of these numbers. I’ll agree that the federal tax system needs to be made simpler. Its why I support a flat tax. But to just say that people who are not making a lot of money to begin with-are somehow conspiring to lower the standard of living of others, well that’s more than just a little over the top if you ask me.
Next up: Words do have meaning.
But Congress, state and local governments still think that you and I are an unlimited well that they can continue to tap. Spending is out of control.
Skippy,
I used to love reading your blog. Not so much anymore with the politics. Not that I disagree with your politics, but I enjoyed the Asian/Navy flavor more.
Skippy,
Come on. I really did not need to go past the whole “Teabagger” comment. You wan to talk numbers? How about the tax cut for 95% of tax payers? Pure BS number manipulation there no?
If I remember my taxes this year my Income tax was the largest gouge in my wallet this year followed by FICA. Sales tax is hard to keep up on unless your a sale receipt hound.
FICA – needs to be at least an option if you do not want that failure coming out of your pay. Let me gamble with my own money for MY retirement, period. If I fail I have no-one to blame but myself.
Sales tax and Income tax – You recommend the Flat Tax, I prefer the Fair Tax. At least with the Fair Tax you would literally have to pay for all those expensive toys if you wanted them.
You seem to slant the “non tax payers” number increase on Bush thus getting even farther off of what the tea Parties were about – Getting ALL Goverment out of OUR wallets.
I guess since I am a capitalist at heart I do not see any oputrage needed if the top1% increased their income by 200%, more power to them.
I silently read your blog most days but this MSNBC-like hit piece needed some comment
In the same period, however, incomes of the top 1% of taxpayers jumped 200%. How about some grass roots outrage about that?
Why should we be outraged? Is there something inherently immoral about making more money than other people? I understand–and share–your dissatisfaction when people cherry pick facts to support their argument, but isn’t that what you’re doing with this particular fact?
In the same period, the income of the lowest levels of the scale didn’t really improve, but it kept up with cost of living and the effective tax rate on the lowest earners was cut in half? Short of more redistribution of wealth, how much more can you do for the bottom 20%?
Mike,
I enjoyed the Asian/Navy flavor more.
I did too. I am very aware of the fact that I have lost some of my “joy de vie”. Problem is, its tough to stay in touch with tenor of the times back in paradise. I’m trying to do better-but so many political things are going on that I really feel strongly about. I want to have my say, same as any other blogger.
YS,
Why should we be outraged? Is there something inherently immoral about making more money than other people?
There is when not all boats are floating in a rising tide. One reason that incomes have not risen in a linear fashion is that Lou Dobbs is right-that increase in wealth came at the expense of the middle class. Offshoring of jobs, downsizing, and executive pay that was not in line with any reasonable expectation.
As for the increase in non-taxpayers numbers-the data supports my claim it happened mostly in the last 10 years.
Probably the biggest thing that bothers me about the Teabaggers ( I do love that term-because I know they bridle at it) is that they are co-opting the very things that they used to despise. The Democrats may be wrong-but to freely throw around words like fascist, socialist, evil-accomplishes nothing in the long run, and does a real disservice to the real definition of the word. This is not only poisoning American political life. It is making it ever harder to solve problems that require cross-party collaboration such as reforming America’s health-care system or its pensions.
One final question-why is it Ok for folks on the right wing to have strong opinions but not Ok for someone to hold an opposite, but equally strong opinion? Which leads to the second question-holding an opposite opinion does not make someone evil, so why do conservatives act like it does?
Skippy,
Most people I know who favor small government would agree with your argument regarding the full context of taxes. Payroll taxes are a huge burden on both low-mid income people and businesses large and small. So is the huge regulatory burden and that imposed by our lawsuit culture. Entitlement and regulatory reform is essential. It’s also true that millions of people (right across the income spectrum) now believe that they are entitled to certain things. At the highest level, this manifests itself in willingness to take bailout money, subsidies etc. At lower levels, it is in the form of the social entitlements. Both are equally wrong. Both have to go if we’re to solve some of these problems. However, whenever anyone proposes reforming Social Security, Medicare or Medicaid, the argument instantly goes to attacking whomever makes it on the grounds that they hate the old and poor (and of course the old and the poor generally vote in favor of benefits they get now without seeing the costs associated with providing them).
I think most Americans are hard-working, that many of our trade and monetary policies have driven jobs overseas and held real wages down for more, but I see this as a consequence of a basically merchantilist or crony capitalist system, not a true free market. What gets my back up is that the system we have, which is the very system the progressives have fought for (i.e. a system of regulation and interference by the government) is falsely presented as a free market. It isn’t. The hordes of lobbyists, their employers and their fellow travelers emerge inevitably when the government is given this type of power, the power to hand out economic goodies in the form of laws, regulations, tax code changes etc. Moreover, such an approach guarantees that the tide won’t lift all boats and will enrich a politically connected minority. And yet, the policies the Obama administration are urging seem to be more of the same. Some of us think that going further down that road is as much a mistake as when GWB travelled it.
It would be nice if you could engage that argument. Ditto noting that when objections were raised along the way that correctly saw where the incremental steps that got us to this place were leading, they were shouted down using much the same language used to attack the Tea Party supporters (many of whom are perfectly ordinary people).
As to the use or misuse of the word “fascist” I’d suggest that the best definition was that given in Jonah Goldberg’s recent book “Liberal Fascism”, which was that fascism was a religion of politics i.e. the belief that everything was fundamentally within the realm of the political system and subject to control (directly or not) by a political class. Although this was generally within the context of authoritarian or totalitarian systems, it could occur within an ostensibly democratic one, too. That said, given the baggage associated with the term, I’d be willing to see it banished in connection with the Obama administration if anyone on the left had ever shown those of us on the right the same courtesy. Free market libertarians, conservatives and Objectivists – the principal groups on the American Right, all stand for limited government, rule of law, free markets, private property, free speech and individual rights. By no possible stretch of the imagination can those views be called fascist, and yet they are routinely characterized as such by the political left, and have been for decades. By any objective measure, politics as a religion better describes the left’s program, and has for decades.
P.S. There is nothing wrong with people on both sides of the political spectrum holding strong views, at least not in my opinion, and naturally this includes all bloggers (whom after all provide all the rest of us non-bloggers with a forum), too. What is a problem is what happens when people with strong but fundamentally different basic principles disagree. This is different from the situation when people disagree on a particular issue, at least depending on why they disagree. For example, many libertarians opposed the Iraq war and even those people who supported it will acknowledge the merits of some of the arguments that you’ve made about it. The people who blog on the Daily Kos also opposed the war, but on very different grounds.
When people disagree on fundamental social and political principles, on things like the role of the government and the nature of the economy, compromise and agreement become virtually impossible until, by whatever means, they no longer disagree. Our Civil War resulted because, ultimately, both sides had very strong but totally different views that could not be reconciled with each other. So, while I’ll agree that the tone of political argument could be greatly improved, to the extent that people genuinely believe different things, things aren’t going to become all nice and happy, not if people on both sides honestly think their own views are right.