More correctly, this should say “47% of Americans pay no FEDERAL income taxes,” but even when used in its correct form (which, in my experience, is less than half the time), it is another meaningless statistic, used by the conservative crowd to whip the base into a parasite-hating frenzy, so let’s take a closer look at the number and what lies behind it. What makes this meme “tick,” exactly? What is it about this catchy phrase that gets red-blooded, “real American” conservatives’ blood pumping, and sends them into chest thumping, spittle-flying fits of rage?
The graph just below is pretty typical of the kind of thing you see from right wing nutters, and before we break down the argument, let’s take a closer look at this graph to see what we can learn from it (pulled from here, a site which self-identifies as being on “The Cutting Edge in Conservative Commentary”).
The first thing to note about the graph is how it subtly morphs the argument.
In the title, it (correctly) identifies the pie chart you’re looking at as a measure of 2007 Personal Income Tax data (Federal, personal income tax data–state data is not included), but by the time we get down to the “Liberal Tax Myth” part, this has magically become “The rich pay more than 70% of all taxes collected!”
It’s not possible to understate the importance of this, because this type of sloppy thinking and bad “logic” is absolutely rampant on the right. This, and other bits of prestidigitation like it, are precisely the mechanism by which conservative talking points are born! Please, I can’t stress this enough, PLEASE be on the lookout for this kind of thing, and don’t be taken in by it.
So much for the cutting edge in conservative commentary.
So…having seen a living example of the kind of thinking that drives this right wing fairy tale, let take a look behind the curtain to see what’s really going on in the conservative mind, then look at the actual data to see what it’s telling us, shall we?
The first thing to understand is that the right absolutely HATES the Social Safety net, and has been actively working to dismantle it since FDR first established it (see the book “New Deal, Raw Deal,” or listen to Hannity, Beck, Limbaugh et., al., for a couple days to get a good grounding in the material, and in the conservative mindset – or, simply read Ayn Rand’s “Atlas Shrugged” to get a feel for where they’re coming from). That is the whole POINT behind the “Starve the Beast” strategy of denying funding to the Federal Government. Cut taxes to engineer a phony “crisis” in funding, blame the safety net, and demand a pound of flesh. That in hand, cut taxes again and repeat the process (all the while, insisting that “tax cuts increase revenues,” of course). That is how the game has been played, literally, for decades.
There is a growing sense of impatience with that approach, however (this, mostly thanks to the Tea Party crowd), and they’d really like to hurry things along. To do that, two things need to happen. One, the poor must be villified, and shown as not being “worthy” of such protections, and two, the protections themselves must be laid at the feet of the Democrats.
On its face, this seems like a fairly easy thing to do, right? I mean we have this awful sounding statistic about the number of non-payers to the Federal Income tax system, and we’ve got FDR, clearly a progressive Dem, who DID, in fact, give us the New Deal, so it’s a lock, right? Game, set, and match, with a win for the Republicans.
Except that, as with most things that come out of the modern Republican party, reality is approximately 180 degrees separated from their statements, so let’s deconstruct this argument and see what’s left when the dust settles.
In the first place, if you’re going to make a claim (either way) about people having, or not having “skin in the game” then you need to look at the totality of the tax system, and see who’s contributing, and in what amounts. You can’t look at any SINGLE PIECE of the tax system and call it done. Looking solely at the Federal Income tax system and counting participants there makes no more sense than, say, looking at the Sin Taxes (on alcohol and smokes), and trying to make the argument that the non-drinkers and non-smokers (who clearly are not contributing to that particular tax) have no “skin in the game.” It’s a silly argument, because there are lots of other taxes those folks DO pay.
Republican refutations of this point are weak, but generally revolve around the notion that Social Security taxes don’t count, because those funds go into the “trust fund” to help pay for their own eventual retirement, and that state level taxes, sales taxes, property taxes don’t count, because those taxes have nothing to do with funding the Federal Government.
The first point is utterly irrelevent, especially in light of the fact that conservatives are quick to leap to the attack, pointing out Social Security as being one of the more pressing long term financial PROBLEMS the Federal Government has (if you’re going to count the program as one of the problems, then by definition, you have to count any money that’s currently FUNDNIG the damned thing, unless, of course, you’re a conservative…then it’s okay to simply ignore that half of the equation in order to make your talking point “sound better.”), and the second refutation pretends that there is no intersection between the State-level and Federal-level tax systems. That is to say, the Federal government lends money to the states to make up shortfalls in State-level budgets. So if the poor WERE NOT paying their state level taxes, this would tranlate directly into MORE Federal dollars having to be spent each year to make up the difference. In short, state taxes paid by the poor abslutely DO count, and absolutely DO impact things at the Federal level.
Further, have a look at the following graphs, which chart how much money Payroll Taxes (paid disproportionately BY the poor) contribute to Federal coffers vs. Personal Federal Income Tax. And yet…the right magically makes this entire Federal income stream disappear! Amazing.
The first graph (left) is from the Heritage Foundation, which accurately describes Payroll Taxes as the second largest component of Federal revenue.
Armed with that information, let’s take a look at the Tax Policy Center’s information on the folks who don’t pay Federal Income tax (note that the actual non participation rate in this tax is 46.4%, but for the sake of convenience, and to follow the convention of the myth, we’ll continue using the 47% figure).
Some intriguing data in this pair of pie charts. It seems that only 18.1% of the American Taxpayers don’t have skin in the game at the Federal Level (but of course, since the Federal and State level tax systems are intractably linked, even this modest number is of questionable value). Further, when you break down the 18.1% of the population who don’t have skin in the game at the Federal level, you find that the overwhelmingly fall into one of two groups.
The elderly, and the really poor (people making less than $20k per year)–these are the “Lucky Duckies” as described by the Wall Street Journal.
Suddenly, this talking point isn’t looking so good.
But there’s more to it than that, even. There are three primary reasons why the non-participation rate is relatively high were Federal Income taxes are concerned. Two of them are the direct results of Republican (not Democratic) policies, and the third happend on an R’s watch. They are:
1)The Bush Tax Cuts – The Bush Tax Cuts of 2001 and 2003 extended and expanded the Earned Income Credit (basically, this is a “negative income tax” which pays the working poor a stipend to help them out. You can look at the graph of non-participation rates in paying Federal Income Tax and see that these changes have added ~10% to the non-participation rate since their enactment.
2)The Earned Income Credit (EIC) – Created by Gerald Ford (R). The idea behind this anti-poverty measure was to provide benefits that would lift more people out of poverty, and to do so via the existing framework of the tax system, rather than invent (and staff) another Federal program to handle the transfer of payments. By using the tax system as a SURROGATE for that new Federal program, the system becomes more efficient (no need to grow the government to make it work…just make better use of a system already in place). He was right. It’s a good idea, and it has worked very well. The problem, however, it that it added a staggering 24% to the non-participation rate, when looking at the total number of payers into the Federal Income Tax system.
3)The final piece of the puzzle that’s been driving up the non-participation rate is, of course, the bursting of the RE bubble in 2007. Unemployed people don’t pay taxes, but they usually DO qualify for governmental benefits, which is why you see a further spike.
The problem, of course, is that the R’s REALLY WANT to blame the poor themselves for having “no skin in the game,” and the Democrats, for establishing a system for the parasitic, mooching poor to survive and thrive. This gets somewhat difficult, however, when ~34 of the 47 percentage points of Americans currently NOT paying Federal Income taxes can be directly attributable to Republican policies (ie – if we were to create a new layer of bureaucracy and route EIC payments through it, instead of using the tax system as a proxy, the non-participation rate would immediately drop from 47% to something close to 13%), and when properly adjusted for, it becomes a really poor talking point.
Update 1: After writing this big, I happened across Darrel’s forum, where I found the cartoon I decided to use as the featured image for this piece.
Darrel is a kindred spirit, from the look of it, and if you follow the link above, you’ll find where he did a similar refutation of this myth, taking it in a slightly different direction, using more, and different graphs, and ultimately arriving at the same conclusion. I like this guy!