“We have always worked hard never taking anything from anyone or the government.”
“I will not accept money from people wealthier than me because it is not my money.”
“I do not accept or expect handouts.”
“Instead of being jealous and hateful towards those who have more, we should be thankful for what we have.”
---comments of random 53%'ers about their defining characteristics
Insidious and nasty. Effective and economical. An over-simplification accepted as fact. It needs no explanation. It’s a familiar assertion repeated by the usual squad of right wing jeer leaders. It’s as convincing as any propaganda piece could ever want to be.
Forty-seven percent pay no taxes.
There’s a class war going on and they are the enemy. Except, of course, it isn’t really so.
Bob Williams, a senior fellow at the Tax Policy Center, was the first to identify the 47% as a noteworthy statistic. In a piece called “Who Pays No Taxes” published in June 2009, Williams said:
"Earlier this year, Obama signed into law the American Recovery and Reinvestment Tax Act of 2009, which, among other things, temporarily put into place some of the refundable credits proposed during the campaign. [Tax Policy Center] TPC estimates that under the new law, 47 percent of tax units will owe no income tax in 2009."
Williams was writing about federal income tax only and the tax units he mentions aren’t exactly the equivalent of citizens. The piece didn’t attract much attention at first. A year later a similar article estimated that the number paying no federal income tax would drop to 45% in 2010. An analysis published for 2011 estimated that 46% would pay no federal income tax in that year.
Then, out of nowhere, the 47% identified in Williams’ 2009 estimate, suddenly went viral. Every right wing talker was repeating it. As a boiled down talking point it was perfect for their audience who eagerly passed it along. "Forty-seven percent pay no taxes." Without attribution or substantiation, they somehow knew it was a fact. Williams’ knew his work had been hijacked and he spoke out in a piece published on July 27, 2011.
"Much has been made of TPC’s estimate that fully 46 percent of Americans will pay no federal individual income tax this year. Commentators have often misinterpreted that percentage as indicating that nearly half of Americans pay no taxes. In fact, however, many of those who don’t pay income tax do pay other taxes—federal payroll and excise taxes as well as state and local income, sales, and property taxes."
Williams went on to explain that tax credits, deductions, and low income, by themselves or in a combination, were pushing Americans off the federal income tax rolls. But the 47% had become a meme that would not be denied. In their narrative about the budget, the debt ceiling, the downgrade, the deficit, the tax code, and Warren Buffet, right wingers allowed no room for anyone to suggest that there could be a revenue problem. If the President was going to talk about raising taxes on incomes at the upper end of the scale, the right insisted that we needed to look at the 47% paying no taxes. They invented a companion meme called "The 53%" who never bothered to understand the 47% before they started an attack.
For now it’s a standoff. The Occupy movement raised awareness that the middle income and lower income workers have no one lobbying for their interests. Pointing to “federal payroll and excise taxes as well as state and local income, sales, and property taxes” paid by the 47% is a weak rebuttal because everyone else pays those too. And the right callously rejects arguments that anyone’s income is too low to tax.
It's worth the effort to deconstruct the meme. But first you have to understand more about the US tax code. The right wing has an advantage here because people readily accept a simple slogan but they quickly get lost in details about numbers. Our system of progressive tax rates, credits and deductions is a mystery to most and anything can fill the void where knowledge is missing.
The truth is that generous Child Tax Credits heavily favored working families with 2 dependent children in 2009 and 2010. The credits had been around since the 2001 Bush tax cuts but the 2009 economic stimulus bill extended eligibility and increased the credit amount to $1000 per dependent child (under age 17), with a limit of two per family. An $800 Making Work Pay Credit was also available and combined with $2000 in Child Tax Credits, the total put a substantial dent in the federal tax bill of many low and middle income families. By using standard deductions on top of the credits, working families raising children were able to reduce their federal income tax bill to zero. Not lazy freeloaders, and not necessarily at the bottom of the income scale, either, they were 47%'ers and they weren't who the 53% said they were. It wasn't a choice of their own that landed them in the non-payer group. The stimulus targeted them for the break. And though they don't ever mention it, and maybe don't even realize it, many of the 53% have been enjoying the same break, too.
Since Child Tax Credits were available to all families with income up to $110,000, many 53%'ers collected the same $2000 in Child Tax Credits as those earning far less. But a family with more income would also have a bigger tax bill, The credits could reduce it but not wipe it out completely like they did for lower income families. This is important to know. When the 53% says everyone should have skin in the game, they're talking about eliminating Child Tax Credits. If that happens some of the 47% will start paying taxes, but many in the 53% will see their tax bill increase.
In 2009, a number of other tax credits were also available to those who qualified. In addition, a large number of deductions were available too. The most popular deduction favors homeowners with a mortgage. Standard deductions exempted income under $9500 from taxation for a single person and twice that amount was exempt for joint filers. The exemption is fair because it is given to everyone. Even those who earned $250,000, paid no income tax on that first $9500.
With credits and deductions favoring those who qualify, across all income levels, and with the possibility of 47%’ers and 53%’ers existing side by side at the same income level, a popular assumption is demolished. Many people assume that the 53% and the 47% are like two horizontal cake layers, one on top of the other. A representation of the payers and non-payers shows the two groups as they really are: vertical structures side by side.
The graph below is based on raw IRS data for tax year 2009. The IRS categorizes the returns it receives into 15 Adjusted Gross Income (AGI) levels. The data shows how many returns were processed for each AGI level , as well as the number of returns where income reported was taxable and where it was non-taxable.
The 47% exist at every income level. The red part of the graph is wider at the bottom since they are indeed more numerous at the lower income levels but they extend all the way up to the $1million or more income level where there were 1470 returns with no taxable income.
It’s interesting to read the comments sampled at the top of this article from people who call themselves 53%’ers and to understand that:
• In the $75,000 - $100,000 income group, 4% paid no federal tax.
• In the $50,000 - $75,000 income group, 12% paid no federal tax.
• In the $40,000 - $50,000 income group, 22% paid no federal tax
• In the $30,000 - $40,000 income group, 33% paid no federal tax.
It’s also interesting to keep their comments in mind and remember that even in the lower income groups there are substantial numbers of people who did pay federal income tax.
• In the $25,000 - $30,000 income group, 53% did pay federal tax.
• In the $20,000 - $25,000 income group, 46% did pay federal tax.
• In the $15,000 - $20,000 income group, 42% did pay federal tax.
• Even in the under $15,000 income group, 14% did pay federal tax.
Another thing to consider is that the 47% refers to people and people aren't taxed. Income is. Using the IRS raw data, it’s possible to see what their combined incomes look like next to the income of the 53%.
The income of the 47%'ers was only 11% of the total AGI reported on all of the tax returns processed in 2009. When you see how little income they earn, compared to the 53%, it doesn't seem very practical to tax it because it won't provide enough revenue to make a difference. In fact, if the income of 47%'ers was taxed at 100%, it would not have been enough to even cover the amount of the budget deficit for 2009.
Bob Williams Tax Policy Center articles quoted above can be found at:
http://www.taxpolicycenter.org/...
http://taxvox.taxpolicycenter.org/...