Don't Let Ideology Blind You

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One feature that jumps out at you is how relatively flat mean income has been for the bottom 80% over the last 45 years and how much it has grown for the top 20%, from an already high baseline.  From 2011 census data.

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Top 1% paid less taxes than lower group

Some people have their facts wrong, while others have no facts. Due to my call for the Republican Party to support higher income, investment and estate taxes on the very wealthy and the upper 20% of income earners, I am getting many angry (and often obscene) e-mails from people who just don’t get it. They complain that I have turned Marxist; they complain about the so-called 47% who pay no income taxes; they complain that you have to cut taxes to promote growth.

Here is what they don’t understand:

1. income tax rates have been cut drastically since 1981 when the top rate was 70%; it is now 35%
2. the 47% pay no taxes due mostly to low taxable income and to changes made in tax law by both Democrat and Republican administrations
3. most voters understand that income and wealth distributions have become obscenely skewed over the past few years.
4. if Republicans don’t lead the way in effecting changes in wealth and income distributions, the election of 2012 will look like a picnic
5. the current wealth and income distributions may even become dangerous to a civil society
6. cutting taxes to promote growth works when taxes are too high and in normal times; largely due to the housing crash, these are not normal times, and tax rates are way down.

We may despise President Obama’s class warfare and hateful, insulting language, but he is basically right about needed tax increases. Of course, at the same time, we need to press him for meaningful spending cuts.

From Bloomberg:

“The Republican presidential candidate’s comments that 47 percent of Americans don’t pay income taxes and see themselves as “victims” dependent on the government signifies a shift in the party’s thinking. Republicans backed refundable tax credits and expanded entitlement programs under George W. Bush. Now they want to curtail entitlements and express concern that not enough people are paying taxes.

“The working people who don’t pay income tax, that is by and large the result of Republican policies,” said Michael Linden, director of tax and budget policy at the Center for American Progress, a Washington group aligned with Democrats. He said he didn’t “understand why they’re not trumpeting this.”

From Factcheck.org:

“Romney is a bit out of date with his claim that 47 percent of Americans pay no federal income tax. That was true in 2009, but the number is lower now, and falling as the economy improves and more people are working and getting paychecks.

Figures come from the nonpartisan Tax Policy Center, and its most recent analysis in July 2011 put the figure for that year at 46.4 percent. That comes to about 76 million individuals or families who paid no federal income taxes in 2011. TPC projected that the percentage would fall to 46 percent this year, and to 44 percent in 2013, under current tax policies.

Let’s take a closer look at the 46.4 percenters.

According to the Tax Policy Center, about half of those who owe no federal income tax are people whose incomes are so low that when standard income tax provisions — personal exemptions for taxpayers and dependents and the standard deduction — are factored in, that simply leaves no income to be taxed. Those are people who earned less than about $27,000.

But that doesn’t mean those folks paid no taxes at all. Many of them paid payroll taxes, those taxes taken out of a paycheck by an employer to fund programs such as Social Security and Medicare. They also pay federal excise taxes, such as those on gasoline, and they may also pay state and local income taxes or property taxes.

So that’s half of Romney’s 46.4 percenters. The rest pay no federal income tax due to tax benefits and credits. Here’s the rest of the breakdown:

 22 percent receive senior tax benefits — the extra standard deduction for seniors, the exclusion of a portion of Social Security benefits, and the credit for seniors. Most of them are older people on Social Security whose adjusted gross income is less than $25,000.

 15.2 percent receive tax credits for children and the working poor. That includes the child tax credit and the earned income tax credit. The child tax credit was enacted under Democratic President Bill Clinton, but it doubled under Republican President George W. Bush. The earned income tax credit was enacted under Republican President Gerald Ford, and was expanded under presidents of both parties. Republican President Ronald Reagan once praised it as “one of the best antipoverty programs this country’s ever seen.” As a result of various tax expenditures, about two thirds of households with children making between $40,000 and $50,000 owed no federal income taxes.

 The rest ended up owing no federal income tax due to various tax expenditures such as education credits, itemized deductions or reduced rates on capital gains and dividends. Most of this group are in the middle to upper income brackets. In fact, the TPC estimates there are about 7,000 families and individuals who earn $1 million a year or more and still pay no federal income tax.”