These are tough times for Ronald Reagan's heirs, or at least some of them. After a generation of disastrous supply-side tax cuts helped produce mountains of debt, plummeting upper-income tax rates a decades-low federal tax burden and record income inequality, thousands of Occupy Wall Street protesters nationwide are finally drawing attention to the plight of the other 99%. In response, a handful of Republican water-carriers led by Red State editor and CNN regular Erick Erickson have declared themselves "We are the 53%," that is, among those who pay federal income taxes in the United States. Sadly for Erickson and his band of flame throwers, Ronald Reagan didn't merely believe that a "millionaire ought to pay more in taxes than the bus driver." As it turns out, the Gipper played a key role in making sure the other 47% doesn't pay federal income taxes.
Conservative activists have created a Tumblr called "We are the 53 percent" that's meant to be a counterpunch to the viral "We are the 99 percent" site that's become a prominent symbol for the Occupy Wall Street movement. The Tumblr is supposed to represent the 53 percent of Americans who pay federal income taxes, and its assumption is that the Wall Street protesters are part of the 46 percent of the country who don't. "We are the 53 percent" was originally the brainchild of Erick Erickson, founder of RedState.org, who worked together with Josh Trevino, communications director for the right-leaning Texas Public Policy Foundation, and conservative filmmaker Mike Wilson to develop the site, according to Trevino.
That feeble effort left some of Erickson's own allies in the right-wing blogosphere shaking their heads. And his hero Ronald Reagan is probably rolling over in his grave.
Almost 20 years ago, as he signed into law the tax bill expanding the Earned Income Tax Credit, President Ronald Reagan hailed it as "the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress."
And with good reason.
Originally created in 1975, the EITC is "a refundable federal income tax credit for low-income working individuals and families" that results in a tax refund to those who claim and qualify for the credit when the EITC exceeds the amount of taxes owed. As the Center for Budget and Policy Priorities detailed in 2005, the EITC has not only been extremely successful in reducing poverty, it has enjoyed broad bipartisan support:
The Earned Income Tax Credit has been found to produce substantial increases in employment and reductions in welfare receipt among single parents, as well as large decreases in poverty. Research indicates that families use the EITC to pay for necessities, repair homes and vehicles that are needed to commute to work, and in some cases, to help boost their employability and earning power by obtaining additional education or training.
The EITC has enjoyed substantial bipartisan support. President Reagan, President George H. W. Bush, and President Clinton all praised it and proposed expansions in it, and economists across the political spectrum - including conservative economists Gary Becker (a Nobel laureate) and Robert Barro, among others - have lauded it.
As it turns out, the Earned Income Tax Credit, which now costs the Treasury $62.5 billion a year, isn't the only reason many of the right-wing's hated 47% pay no income taxes. (Of course, virtually working Americans pay payroll taxes; as David Leonhardt pointed out in the New York Times, "About three-quarters of all American households pay more in payroll taxes, which go toward Medicare and Social Security, than in income taxes.") Other tax breaks, including the President Bush's expanded child tax credit, also contribute to millions of Americans owing no income tax each year. As Leonhardt explained:
The 47 percent number is not wrong. The stimulus programs of the last two years -- the first one signed by President George W. Bush, the second and larger one by President Obama -- have increased the number of households that receive enough of a tax credit to wipe out their federal income tax liability.
But the modifiers here -- federal and income -- are important. Income taxes aren't the only kind of federal taxes that people pay. There are also payroll taxes and investment taxes, among others. And, of course, people pay state and local taxes, too.
Even if the discussion is restricted to federal taxes (for which the statistics are better), a vast majority of households end up paying federal taxes. Congressional Budget Office data suggests that, at most, about 10 percent of all households pay no net federal taxes. The number 10 is obviously a lot smaller than 47.
How much smaller? As the Washington Post concluded in this interactive presentation of "Who Pays No Taxes," it turns out that "just 1 percent of non-elderly, non-workers making more than $20,000" send Uncle Sam nothing each year.
Sadly for the 53 percenters, their beloved Ronald Reagan had a lot to do with that. Then again, Ronald Reagan did many things - raising taxes 11 times, tripling the national debt, negotiating with terrorists, providing arms to Iran and signing abortion rights bills - that would make them unhappy.