Sunday, April 8, 2012

The Conservative Myth About Americans Who Pay No Income Tax

Ken O’Brien

Talk to any dyed-in-the-wool conservative Republican or devout Tea Partier and one topic almost certain to come up is the observation that almost half of all American households pay no federal income tax.

Therefore, they argue, it is wrong to claim that the wealthiest Americans are bearing more than their fair share of the federal tax burden. 

These non-tax-paying “freeloaders” have become the bête noire in the opposition to an increase in tax rates for upper income earners.

This talking point had its origin in a June 7, 2011 floor speech by Senator John Cornyn (R – Texas). In that speech Senator Cornyn said, “…the fact [is] that according to the Committee on Joint Taxation, 51 percent -- that is, a majority of American households -- paid no income tax in 2009. Zero. Zip. Nada.”

The Wall Street Journal’s “Washington Wire” noted last August that, “A new [Republican] orthodoxy has emerged in recent days on taxes: Not enough people are paying them.
In Iowa Tuesday, Texas Gov. Rick Perry was asked what to do about an ‘entitlement culture’ in the U.S.
‘We’re approaching nearly half of the United States population that doesn’t pay any income taxes,’ he responded. ‘And I think one of the ways is to let everybody, as many people as possible, let me put it that way, to be able to be helping pay for the government that we have in this country.’”

On Friday, April 6, The Brookings Institution issued a report on this subject.

In this report, that drew from The Hamilton Project, it was noted that, “A popular myth swirling around Washington, DC, and throughout the media these days is that many Americans do not pay taxes, and are therefore free-riding off of our society without contributing themselves….  The origin of this misconception is the observation that only about 54 percent of American households paid federal income taxes during recession-affected 2011. But that statistic is misleading because it provides an incomplete picture of the overall tax burden on American families, and because it incorporates individuals who naturally shouldn’t be paying taxes because of their age or economic circumstances due to the Recession. A closer look reveals that nearly all Americans do, in fact, pay taxes.”

As shown in the figure below, after incorporating payroll taxes, the proportion of American households who paid federal taxes in 2007, a non-recession year, jumps to 78 percent.

Even this statistic is misleading because it counts older households, who are often retirees, and young individuals, even if they are still in school. Many households with no tax liability are young or old, meaning that they are likely to be led by students who subsequently will pay no taxes or retirees who paid taxes over their lifetimes. The figure below illustrates the relationship between age and the odds of paying payroll and income taxes. The graph makes clear that younger individuals—those in their late teens and early 20s—pay taxes at relatively low rates, but that is largely because they are in school and not working.  But as they get older and find jobs, the evidence suggests that they will pay taxes. Similarly, after age 60, when more and more Americans are retiring and leaving the labor force, the fraction paying taxes falls rapidly. These retirees have certainly contributed to America’s revenue stream over their lifetimes. To this point, as the U.S. population ages into the future and a greater proportion of Americans reach the retirement age, it is inevitable that a growing percentage of the overall population will pay no income or payroll taxes.

Incorporating other forms of taxation leads to the conclusion that nearly 100 percent of Americans pay taxes in some way, shape or form. All consumers bear the burden of state and local property, sales, and income taxes, as well as excise taxes on items like gasoline, alcohol, or cigarettes. These other taxes tend to be regressive, imposing more of a burden on low-income families than on high-income families—the state and local tax burden is over twice as large as the federal tax burden for the bottom fifth of households.


  1. This on the day of rebirth?
    What happened to all we need is love?

    Um, I didn't buy that previous post either.

    1. You forgot to call me a disciple of that Kenyan Muslim.

    2. P.S. On the Happy Easter post, click on the word "REBIRTH" under the picture of the lilies.

    3. That was the "Easter Egg" in the post and it's been there the whole time.

  2. Holy Hope-ocrisy
    Grab the Fabreeze I think this self described Keyan Muslim disciple needs a change.



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