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.
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.