You've all heard it in one form or another, the lie that either says straight out that half of all Americans pay no taxes or slightly less horrendous lie that half of Americans pay no income tax, or the the lie-by-omission that half of Americans don't pay any federal income tax.
Too often, the media and our elected representatives allow those lies to go unchallenged.
Too often, so do we.
It would be good if we could avoid repeating their talking points.
It would be even better if we knew how to rebut them and did so, with great vigor.
So let us begin.
The truth is that the portion of government revenue to which the GOP Talking Point is referring (federal income tax) is just a shade over 20% of the total government revenue (all levels) for 2010.
It's like saying that the Top 1% pay almost no taxes just because they pay an effective rate of about 1.6% on their income on Social Insurance contributions while the lower and middle income folk pay from 8.5% to 9.6%. Just because those with 20% of the income pay only a 4% share of the Federal Social Insurance contributions (aka Payroll Tax) doesn't mean they pay no taxes. (Even the estimated 10,000 HINT-Americans earning over $200,000 in 2007 who paid no federal income tax tax probably paid a little of some kind of tax, somewhere.)
I would challenge anyone to produce evidence of any appreciable number of people who pay Zero Taxes (Federal,State, Local).
As to all Federal Taxes, it is estimated that the number of households that actually pay Zero Federal Taxes is about 10% .
So, if the Republicans are going to call half of all Americans free-loading bums at the same time they are shifting a greater tax load onto those very same people, perhaps they ought to be confronted with whatever degree of civility you think appropriate under the circumstances.
So where does this claim that half of Americans pay no taxes come from? As usual with Republican Talking Points, with sufficient archeological forensics, you often find the skeletal remains of some truth from which the myth was built.
The historic trend has indeed excused an increasing number of households from paying Federal Income Tax (primarily because their income is too damn low).
The stimulus tax cuts for those below $250,000 and disproportionate impact of the recession on lower and middle income households have combined to increase the number that pay no Federal Income Tax last year and this year. In fact the incomes of the bottom 50% are so low that the effective rate for that entire group in 2008 was 2.59% according to the Tax Foundation (who doesn't even bother breaking down that category any further.)
Does that mean they pay NO TAXES? No.
First: Income Tax is Not the Only Source of Government Revenue
Federal Income Tax amounts to only 41.5% of Federal Revenue for 2010. ($899 B)
Federal Social Insurance Contributions amount to 40.0% of Federal Revunes for 2010. ($865 B)
The latest distributional data I've found gives us a rough idea of who pays what of those two:
Effecitve Tax Rate Distribution by Income Category 2006
Fed. Income Tax % Payroll Tax %
Lowest 20% -6.6 8.5
Second 20% -0.8 9.2
Third 20% 3.0 9.4
Fourth 20% 6.0 9.6
Highest 20% 14.1 5.8
Top 10% 16.0 4.6
Top 5% 17.5 3.4
Top 1% 19.0 1.6
Share of Tax Liabilities by Income Category 2006
Fed. Income Tax % Payroll Tax %
Lowest 20% -2.8 4.4
Second 20% -0.8 10.3
Third 20% 4.4 16.6
Fourth 20% 12.9 25.0
Highest 20% 86.3 43.5
Top 10% 72.8 25.7
Top 5% 60.9 14.5
Top 1% 39.1 4.0
[From my recent diary concerning how the $2.3 Trillion SocSec Trust Fund balance was collected: Either Leave Social Insurance Alone Or Pay Us Back Our $ 1 Trillion. ]
Second: Federal Revenue amounts to approximately One Half of the Revenues for all Levels of Government Within the US. (Putting Fed Income Tax at a shade over 20% of the total revenue for all levels of Govt.)
Holding (or pushing down) the federal income tax end of the Governmental Revenue Water Balloon has shifted revenue collections to the State and Local Governments as they seek to pick up the slack and meet the unmet needs of their communities. For 2007 the Tax Policy Center has calculated that about half of all reveue collected by all governments within the US were collected by the Federal Govt and about half were collected by State & Local Govts.
As with most states, , my state (Minnesota) has a regressive tax system where the rich pay a lower effective overall tax rate (State & Local) than the upper-middle, middle, lower-middle and low income categories. (This is often even more severe for local taxes where the current year shift is most likely to occur. And the richer they are the less that effective rate becomes, so that you get these kind of results:
Back in 1988, the effective rates paid for all our State and Local taxes and fees etc, was within a few tenths of a percent between all categories of income. It wasn't a progressive system, but at least it wasn't regressive.
Since then, things have changed.
The effective State/Local tax rates for the middle and upper middle have increased 38% since 1988.*
That effective rate for the Top 10% have gone up only 14%.
For the Top 5% they went up only 11%.
For the Top 1% they went up only 9%.
The Middle now pays an effective tax rate that is over 12% (12.1% - 12.3%).
The Top 10% pays only 10.4%.
The Top 5% pays 10.1%.
The Top 1% pays an effective rate of only 9.7%, over 20% lower than the effective rate paid by the Middle.
So next time the Republicans try to tell anyone that half of all our fellow citizens are LINT (low income no taxes), be prepared to tell them to stop their whining because that whole attitude towards Americans and that whole approach to shifting the load by hiding the truth is about to end.
2011 MinnesotaTax Incidence Study(Using February 2011 Forecast)
As to Effective State/Local Tax Rates by Income:
Table 1-8 Pg 34/160 pdf (Effective Tax Rates by Population Decile
All Taxes, 1988–2008, 2013 (est.))
As to Ranking of State Tax Systems by Progressivity:
Table 4-13 Pg 79/160
ITEP “7-Point” Suits Index by State
Non-Senior Households in 2007
* As to 2010 Reveune from Federal Income Tax and Social Insurance Contributions:
Congressional Budget Office resources:Table 4-1 CBO’s Projections of Revenues
It might be interesting for you to compare how your State has become more or less regressive in the last years.