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Five myths about the 47%

Posted by marshallz10 z9-10 CA (My Page) on
Sun, Nov 4, 12 at 10:28

Five Myths About the 47 Percent

1. Forty-seven percent of Americans don't pay taxes.

The most pernicious misconception about people who don't pay federal income taxes is that they don't pay any taxes. That oft-heard claim ignores all the other taxes Americans encounter in their daily lives. Almost two-thirds of the 47 percent work, for example, and their payroll taxes help finance Social Security and Medicare. Accounting for this, the share of households paying no net federal taxes falls to 28 percent.

And those aren't the only other taxes they bear. According to economic research, the corporate income tax discourages domestic investment; that depresses wages, so workers are effectively paying some of the corporate tax. More directly, many households pay federal taxes on gasoline, beer and cigarettes. And then there are state and local sales, property and income taxes; all of which are often less progressive than the federal income tax. Putting all these together, a family of three with an income of $30,000 would owe no federal income tax (in fact, they would get money back). But they could easily pay more than $4,500, or 15 percent of their income, in taxes.

2. Members of the 47 percent will never pay federal income taxes.

Politicians and commentators often talk about those who don't pay income taxes as though they're in a special club with lifetime membership. In fact, it's a highly diverse group, some of whom move in and out from year to year.

When they first join the workforce, for example, young people may not earn enough to pay federal income taxes. The same is true for many of the temporarily unemployed, working parents and entrepreneurs whose businesses experience a loss. But most of these people look forward to the day, perhaps in just a year or two, when their incomes will rise and they will join or rejoin the 53 percent of Americans who do pay federal income taxes.

The reverse is true for many senior citizens: They may pay no federal income tax in retirement, but most did during their working years.

3. Many high-income people game the system to pay no income tax.

Our jerry-rigged tax code leaves many Americans with a nagging sense that other people are exploiting loopholes to avoid taxes; and the rest of us have to make up the difference. Sadly, there's an element of truth to that. But gimmickry by high-income taxpayers has essentially nothing to do with who does and doesn't pay income taxes. Our colleagues at the Tax Policy Center estimate, for example, that households with cash incomes of $200,000 or more account for less than 0.1 percent of the 47 percent.

The vast majority of people who pay no federal income tax have low earnings, are elderly or have children at home. They are exempt from the income tax because of features Congress added to the tax code, thanks to bipartisan efforts, to help these groups. For example, Presidents Ronald Reagan and Bill Clinton both favored the earned-income tax credit (EITC), which has helped millions of families stave off poverty.

About half of these households don't pay federal income tax simply because their incomes are low. More than one-fifth are retirees who benefit from tax breaks for seniors, including an exemption for most Social Security benefits. And another one-seventh are working families with children whose income tax liability is eliminated because of the child tax credit, the EITC, or the child and dependent care credit. Together, these three groups of taxpayers account for almost 90 percent of the households that pay no federal income tax.

4. The 47 percent vote Democratic.

In the leaked video that went viral this past week, Romney counts the 47 percent as people who will vote for President Obama "no matter what." There is no direct way to match people's tax records and voting habits, so we have only circumstantial evidence on how the 47 percent votes; but they certainly aren't all shoo-ins for Obama.

Let's take low-income and elderly households, which are particularly likely to pay no federal income taxes. Low-income households do tend to vote Democratic -- when they vote. But fewer than half of individuals in households with incomes below $30,000 voted in 2008, according to the census, compared with about 60 percent of people with higher incomes. On the other hand, Romney appears to hold a lead over Obama among elderly voters, a group that votes enthusiastically.

5. Tax increases are the only way to bring more of these households onto the tax rolls.

Romney's comments about the 47 percent raise the question: If too many Americans pay no federal income tax, how should we reduce that number? One strategy would be to cut back on tax benefits. The expansion of the child credit under President George W. Bush in 2001, for example, removed many households from the rolls. Allowing that expansion to expire at year's end - one factor that could lead to falling off the "fiscal cliff" - would add many back. But few observers and almost no politicians endorse that idea or other changes, such as subjecting more Social Security benefits to taxation, that would have similar effects.

But there is another way. The share of households paying no income tax is near record highs not only because of tax policy but also because of the struggling economy. Higher earnings, particularly for low- and moderate-income workers, would move more Americans into the income-tax-paying category. Indeed, projections show that the share of households paying no federal income tax will decline by more than one-fifth in the coming decade because of economic growth and inflation. That drop would be faster and steeper with a stronger, prolonged recovery, which would give more Americans the pleasure of paying federal income taxes.

Here is a link that might be useful: Five Myths About the 47 Percent


Follow-Up Postings:

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RE: Five myths about the 47%

Thanks, Marshallz... hopefully, that will help to pop a few talking point balloons and bring some ideas and thoughts back to earth, where they belong.

Although, most of these things have been said before. It's not the first time we've mentioned the fact that everyone pays taxes of one kind or another, and that sort of thing. But as as noted in another thread, facts/fact-checking are leftist/liberal characteristics, and don't seem to apply to some folks...


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RE: Five myths about the 47%

Marshall, thanks for posting.

As far as I am concerned and everyone I know, none of us are operating under any myths about the 47%.

We already know what is included in the 47%.

Some of the points seem to be an "affirmative defense" of the 47%, not that anyone needs defending.

Everyone that receives income, even if it not generated by themselves, should pay income tax in my opinion.

No if's and's or buts--low income, high income, doesn't matter.

Everyone should have skin in the game.


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RE: Five myths about the 47%

Everyone that receives income, even if it not generated by themselves, should pay income tax in my opinion.
No if's and's or buts--low income, high income, doesn't matter.
Everyone should have skin in the game.

How absurd. And this is not the game of survival of the fittest capitalism that Romeyites view our system.
We do not have pure capitalism where everything is privatized and we allow the least fortunate among us - the invalid, the wounded veterans, the unemployed, those who become ill without health insurance, immigrants struggling to make ends meet, minorities finding it tough to find work in blighted areas, teen mothers who cannot afford to live, and others to suffer while we promote a Romney style plutocrat class.

Why anyone outside the very top income earners would vote for the Mormon Plutocrat from Michigan/Massachusetts/Mexico is beyond me.

Romney's description of the 47% as non-taxpayers and then writing them (or anyone for that matter) off as Obama supporters was provocative. When one provokes, one should expect a vigorous and spirited response from the American people most of which have received government benefits in their lifetime or have family members that rely on them (Medicare, Social Sec., VA benefits, unemployment, food stamps). Romney is so out of touch with average Americans it isn't even funny.


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RE: Five myths about the 47%

You can think it absurd if you want, Heri.

I think it's absurd that people want something for nothing.


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RE: Five myths about the 47%

I agree. ALL income ought to be taxed although progressive taxation is troubling to me but probably inevitable because we are taxed in so many other ways in mostly un-progressive ways.


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RE: Five myths about the 47%

And who is it that wants something for nothing?

Would it be, perchance, all those wealthy people suckling at the teat of federal subsidy?

Or maybe it's those who harbor their "income" offshore in places like Luxembourg, The Caymens, and other notable tax haven nations?

Or maybe you're thinking of those people, which are really corporations, that receive huge subsidies and/or other special recompense?

I'm guessing, however, that we're reaching into our little bag of usual stereotypes for this one...


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RE: Five myths about the 47%

Excellent summary you found, Marshall. IMO it is fair and balanced. Thanks for sharing :)


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RE: Five myths about the 47%

Marshall, why does progressive taxation trouble you?


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RE: Five myths about the 47%

I agree with heri on this one.


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RE: Five myths about the 47%

Ninamarie, my answer is troublesome to me as well. We have a Federal tax code that runs into thousands of pages, most of which was written on behalf of special interests seeking tax relief through exceptions and deductions from taxable income. Among the richer few percentile of taxable population (and others with personhood), earned income is a minute part of their total income; the rest comes as dividends, interest on tax-free bonds, and so on.

Thus the weight of the tax burden falls on the working middle class regardless of the graduated tax system.


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RE: Five myths about the 47%

OK, to finish my reasoning: the taxing system promotes corruption.


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RE: Five myths about the 47%

You are right, Marshall.

I believe in a flat tax, everyone pays SOMETHING, even if nominal, and no deductions or allowances like "loopholes."


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RE: Five myths about the 47%

"I believe in a flat tax, everyone pays SOMETHING, even if nominal, and no deductions or allowances like "loopholes.""

Me too. I can't imagine why anyone would be against that.


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RE: Five myths about the 47%

Because a flat tax is unfair. That's why our tax system is progressive.


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RE: Five myths about the 47%

The people that aren't paying a thin dime NOW and COULD be paying a nominal amount are most likely the ones that would be against that.


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RE: Five myths about the 47%

I am having trouble understanding how people do not have "skin in the game" if they are paying taxes of some sort even if they are not paying an "income" tax. Taxes are attached to so very many things like gasoline, phone bills, property taxes are built into the cost of rent, etc. I think the only reason why these are not labelled as income taxes is to hide them but let's face it, they certainly diminish one's cash available.


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RE: Five myths about the 47%

I think, tishtoshnm, because some of us, if not all of us, are referring to a federal income tax.

The federal government does a lot for people, and if you aren't contributing to the federal government but you have income, you don't have skin in that game.

You might in your state taxes, but not in the federal government.


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RE: Five myths about the 47%

1) make it very easy for poor people to vote

2) tax anyone under the Federal Poverty level $100 a head/year, above that, a progressive tax with no deductions, going from 5% - 30% - the amount varies yearly to reach a non-partisan estimate of a balanced budget.

3) watch how fast we stop blowing money on foreign wars and the military industrial complex.


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RE: Five myths about the 47%

I wonder if those that believe income should be taxed include dividends , interest and capital gains in the equation.


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Usually not. I do believe the other sources of income ought to be included as earned income.


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RE: Five myths about the 47%

Demi, part of the taxes on gasoline are a federal tax. A quick google search indicates it may be 18.4 centers/gallon, so if someone has a 25 gallon tank, for every fill up, they are contributing $4.60 to the federal coffers. I believe that many of the taxes or fees on phone bills are federal as well. While less concrete, if one purchases a good from a business that pays federal taxes, it is rather safe to assume that those taxes are reflected in the price of that good, so they are indirectly paying the taxes as well.


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RE: Five myths about the 47%

Okay, yes you are right, those could be a contributions to the federal coffers.

But it's still not paying taxes to the federal government on one's INCOME.


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RE: Five myths about the 47%

No, such taxes are another taking from your paycheck along with hidden and more overt taxes, fees, licenses, etc.

Then there are State, County and local taxes in many places.

I figure that I give up far more of my income to the governments than I am allowed to keep and spend. But then, I live on the left coast and am self-employed. Talk about discrimination.


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RE: Five myths about the 47%

I think a flat tax is a great incentive to acquire more income, however you do it--earned, dividend, interest, etc. The more income you have, the more tax you pay, though not progressively.

However, the more income you have, the more you get to keep. You make $100, you keep $90. You make $200, you keep $180. What would you rather have; $90 or $180?


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RE: Five myths about the 47%

With a progressive tax you only pay a little bit more on each stage of income, not the whole thing.

So at $20,000 you might pay 10%
At $35,000 you might pay 15% but only on the extra $15,000 (you still pay 10% on the first $20,000)
At $50,000 you might pay 20% but only on the amount above $35,000. You are not paying 20% on the whole $50,000.

So talk about not having the incentive to make more in a progressive system is equal bunk. It doesn't throw your whole income into a new bracket, just the extra income.

If I make $75,000 and the extra $25,000 is taxed at 25%, I still keep 75% of what I earned, who wouldn't want that extra money even after taxes? Is someone going to turn that down just because they have to pay taxes on it? If so, they're just hurting themselves.


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RE: Five myths about the 47%

With a flat tax, the more income you receive, the more tax you pay. That's fair. Why should you pay a higher percentage because you receive more income? That's unfair. IMO that invites corruption.

Keep it simple.


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RE: Five myths about the 47%

Because it's an unfair burden for those who make less.


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Flat tax is regressivie. I don't know how many threads we have had discussing this fact. FICA is regressive because it stops after $100,000+. I would like to see the deductions continue to maybe $300,000.

I'm in favor of progressive tax brackets, perhaps a few more brackets on the higher end.


Marshall, nice summary although with a little thought most of us could have come up with the same reasons why an individual might not be paying federal income tax. The unthinking defence of Mitt Romney's comments was an attempt to stop any rational thought on the subject by sheer volume of verbiage.


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RE: Five myths about the 47%

Posted by jerzeegirl 9 (My Page) on
Sun, Nov 4, 12 at 22:31

Because it's an unfair burden for those who make less.

*

Whose problem is that?

It should be an incentive to make more.

Boo Frickety Hoo.


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RE: Five myths about the 47%

I'll just bite my tongue.


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RE: Five myths about the 47%

"Because it's an unfair burden for those who make less."

Burden? What burden? Paying your fair share via flat tax would be a burden--how so? So low income receivers should pay a lesser %; why?

I think one would gain pride in oneself to truly have equal "skin in the game", as opposed to keeping your well-shod foot on their necks, making them feel like losers.


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RE: Five myths about the 47%

Buzz. Buzz. Swat.


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RE: Five myths about the 47%

How rude!


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RE: Five myths about the 47%

The keyword is regressive.


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RE: Five myths about the 47%

The people that aren't paying a thin dime NOW and COULD be paying a nominal amount are most likely the ones that would be against that.

I pay a heck of a lot more than a thin dime in federal taxes. I'm against a flat tax. The assumption that it's only people not paying taxes that are against a flat tax is just wrong.


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RE: Five myths about the 47%

I never assume. It gets tedious, but is worth the wait.

Time to sleep.


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RE: Five myths about the 47%

I have thought for some time that a significant part of the cost of maintaining the commonwealth is incorporated into the cost of living for everyone, before any specific taxes are considered.


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RE: Five myths about the 47%

I agree, Pnbrown. It would appear though that some people would not recognize such as being a contribution. If it is not a contribution specifically labeled INCOME TAX well then, it is just freeloading.


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