The actual 53%

So, the conservative are fighting back against this 99% thing by once again obsessing over the fact that 47% of Americans currently do not pay federal income taxes.  That’s not “don’t pay taxes” it’s “don’t pay federal income taxes” for many people– only a modest portion of the overall tax bill.  First, Slate’s Annie Lowery does a good job running down the numbers on the 47%:

What is going on with that other 47 percent?…

The short answer is: deductions and poverty. About half of households within that 47 percent do not end up paying federal income tax because they qualify for enough breaks to cancel their tax obligations out. Of that group, 44 percent are claiming tax benefits for the elderly, like an exemption for Social Security payments. And 30.4 percent are claiming credits for “children and the working poor,” like the child-care tax credit. The remainder get breaks for investment income, spending on education, itemized deductions, and a mish-mash of other things. When combined, it’s all enough to cancel out their income tax requirements…

That covers about half of the households that don’t pay any federal income taxes. The other half of households are just too poor to pay them.

Hmmm.  Doesn’t exactly sound like a bunch of free-loaders.  Except for those poor people.  But, a lot of those people are temporarily poor because of the horrible economy.  They were probably paying taxes in 2008 and if the Republicans would stop insisting on trying to ruin the economy, they’d be paying taxes again in 2012.    What these arguments always fail to consider is that part of all this is just lifecycle effects.  If you are under 22 or over 65, you are probably a net drain on the economy.  If you are between those ages, you are probably a net benefit.  Everybody(who lives long enough) is therefore at some point going to be both.  It’s also worthy emphasizing that for most people, time on welfare truly is transient.  Sure there are hard-core life-long “leeches” if you prefer, but most people actually use the benefits and get off when things improve.  Which is actually the whole point, of course.

Finally, I really like was Chait’s take on this:

If you were to take this argument seriously, it would suggest that there’s some problem with having one particular stream of tax revenue be more progressive than other streams. After all, if you’re an American, you pay a bunch of taxes and you get a bunch of government services in return. You pay some taxes to your city for police and schools and city hall and local roads. You pay some taxes to the state for colleges and Medicaid and some other roads. You pay more taxes to the federal government for defense and Social Security and still other roads.

Does it really matter if nearly half the population is not paying some of those taxes but is paying other taxes? Has the division between these different revenue streams suddenly taken on some vital metaphysical significance? I doubt it. The “47 percent pay no income taxes” statistic, which has gained sudden ubiquity on the right, is an attempt to create a different kind of class consciousness — a reflection of the right’s Ayn Rand–inspired conviction that politics pits virtuous producers in a struggle against venal looters and moochers.

Short version: obsessing on the 53-47 federal income statistic grossly distorts the real state of affairs.  And as for the 99 vs 1?  Well, the evidence for the relative income gains of the top 1% relative to everybody else (though, the top 10% haven’t fared bad, either) is indisputable.

About Steve Greene
Professor of Political Science at NC State http://faculty.chass.ncsu.edu/shgreene

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