You may have seen by now this chart, explaining the identity of the 47% (actually 46.4%) of Americans who “pay no income tax.” As you can see, around two-thirds of that subset do pay Social Security and Medicare taxes. If you count both sides of that tax, the employer and employee side, you get to 15.3% of their income in taxes. Mitt Romney paid what, 13.9%, in the one year we know about, and almost none of that included payroll taxes because it derived from interest and capital gains income.
Of the remaining one-third of the “lucky duckies,” about half are the elderly, who are retired, draw no income, and therefore pay no taxes. Only a small sliver pay both no income taxes or payroll taxes and actually work for a living, and they don’t have any tax liability because they don’t make enough. Incidentally, substantial numbers of this 47% subset, both among seniors and working class whites, vote consistently for Republicans.
The reason the poor don’t have tax liability is that the country made a decision, under Republican Presidents, to reduce that. More specifically, Republican Presidents made that decision to compensate for the fact that they wanted to give rich people a giant tax cut. So they made them “broad-based” to make them look somewhat more equitable.
Part of the reason so many Americans don’t pay federal income taxes is that Republicans have passed a series of very large tax cuts that wiped out the income-tax liability for many Americans. That’s why, when you look at graphs of the percent of Americans who don’t pay income taxes, you see huge jumps after Ronald Reagan’s 1986 tax reform and George W. Bush’s 2001 and 2003 tax cuts. So whenever you hear that half of Americans don’t pay federal income taxes, remember: Ronald Reagan and George W. Bush helped build that [...]
Some of those tax cuts for the poor were there to make the tax cuts for the rich more politically palatable. “Do you think we wanted to include a welfare payment to people who don’t pay taxes and call it a tax cut?” A top Bush administration official once asked me. “No. But that’s what we needed to do to get it done.”
But of course, these had a dual purpose. They not only served the immediate goal of slashing the tax liability of the rich. They also created a “nation of moochers” that could immediately be pointed to by Republican politicians, to divide the lower classes and separate them. The middle class, which has some understanding that they pay taxes, will envy those who do not, and look to the very Republicans that made this happen to rectify the situation. It serves class and racial politics to have this large underclass that “doesn’t” pay taxes. Conservative politicians point to the “takers” and say that they want to hike taxes on the rich out of envy and frustration. They say that if those people don’t pay taxes they don’t deserve services. So there are multiple ways that creating this 47% myth serves conservative theories of government.
Oh, and the lack of self-awareness extends to the fact that the states housing the most Americans who pay no income tax are almost all in the South.