Why do 47% pay no income taxes? Because of the Reagan and Bush tax cuts.

  • Published on September 17th, 2012

Romney is taking heat yet again, this time for saying he’s written off nearly half of Americans. Because they don’t pay Federal Income Taxes, he says that they are nothing but moochers sucking off the government tit.

Update: We’ve got the full Secret Video up here! Watch it (The 47% comments come at 17:00 into the first video), then come back and read the analysis.

Just to be clear, these are Romney’s words: 47 percent of Americans “believe that they are victims… I’ll never convince them they should take personal responsibility and care for their lives.”

This has been quite the GOP meme this year. But is there really a “taker class” and a “job-provider class” in this country? Ayn Rand’s classic “looters” and “Galtians”?

Why don’t they pay income taxes?

No. The entire frame is bullshit.

First of all, as Ezra Klein points out at the Washington Post,  the vast majority of those 47% either have jobs or are retired elderly.

…61 percent paid payroll taxes — which means they have jobs and, when you account for both sides of the payroll tax, they paid 15.3 percent of their income in taxes, which is higher than the 13.9 percent that Romney paid. Another 22 percent were elderly.

But what about income taxes? Klein notes there’s a very good reason why a whole bunch of Americans don’t pay income taxes: Because first Ronald Reagan, and then George W. Bush, cut their taxes as part of the  deal to cut taxes even more for high earners.

So whenever you hear that half of Americans don’t pay federal income taxes, remember: Ronald Reagan and George W. Bush helped build that.

But wait… why aren’t corporations paying taxes?

We’ve also seen that – despite the right wing whining about how high corporate taxes are, some of the biggest companies in the world don’t pay any taxes at all, and the rest have crazy loopholes that let them pay reduced rates.

Sure, the official rate is 35 percent, but that’s just for suckers. The group Citizens For Tax Justice reported last year that 300 of the most profitable US companies paid, on average, 18.5 percent. and 78 companies paid zero or less.

Another report by the Congressional Budget Office estimated that corporate income taxes averaged at just 12.1 percent, the lowest rate in more than 40 years.

And as a share of the overall economic pie (GDP), corporate taxes are a joke:

corporate taxes at an all time low as share of GDP

And that means, with corporations paying a smaller share of taxes, somebody else has to take up the slack. Guess who?

Corporations pay less of the tax burden, so individuals pay more

But if half the people aren’t paying taxes, and corporations aren’t paying taxes… who’s paying taxes?

Oh, you caught that.

Nobody. That’s why we have a huge budget deficit.

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As Robert Borosage put it at the Campaign for America’s Future:

“.. Washington doesn’t have a revenue problem, it has a spending problem,” says House Majority Leader Eric Cantor (R-Va.).

…To borrow one of Cantor’s favorite sneers, “How could anyone believe that?” Here’s a graph showing federal revenues as a percentage of GDP. Clearly Washington has a revenue problem.

revenue as percent of GDP

In fact, Americans are paying the lowest percentage of their income in taxes since 1958. Corporate taxes which brought in over 6% of GDP in 1950 are now near historic lows of barely 1%.

Here’s another chart… look at how corporate share has shrunk over the years. And how revenue first crashed with Bush’s tax cuts, and have now cratered with the Great Recession.

But the only plan the Republicans have to create jobs is to cut taxes!

You caught that, too?

If cutting taxes created jobs, the unemployment rate would be 0.0%. Or lower. Bush tried. It was a total fail. After the Bush tax cuts, job growth was the worst since the Great Depression.

Profits are at an all time high, corporate tax rates and share of tax revenue are at all-time low, and yet the corporations just can’t seem to bring themselves to create those ephemeral jobs without just one more round of cuts.

And all the GOP can do is whine about how unfair it is that they already cut taxes as low as they could go for  47 percent of us.

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About the Author

Jeremy Bloom is the Editor of RedGreenAndBlue. He lives in New York, where he combines his passion for the environment with his passion for film, and is working on making the world a better place.