Who are Mitt Romney’s freeloading 46 percent?
Who are these 46 percent* of Americans who pay no income taxes (but who do pay a variety of other federal taxes, including payroll taxes that fund Social Security and Medicare)?
The Tax Policy Center, which generated that statistic in the first place, breaks it down for us. They are:
- Fifty percent of those not paying income tax are “tax units” — someone filing as an individual or a couple filing jointly — that simply make too little money. For example, ” … a couple with two children earning less than $26,400 will pay no federal income tax because their $11,600 standard deduction and four exemptions of $3,700 each reduce their taxable income to zero.” These are often working people — janitors, nursing home aides, Walmart clerks, etc. An income of $26,400 breaks down to one full-time job paying roughly $12.70 an hour.
- Two-thirds of those who do not pay income taxes do pay Social Security and Medicare taxes. The combined payroll tax on their labor of 15.3 percent exceeds the 13.9 percent effective tax rate paid by Mitt Romney in 2010. Because payroll and income taxes are collected the same way, many Americans may confuse the two and falsely believe that they pay income taxes and thus are not part of Romney’s despised 46 percent.
- Roughly 22 percent of those not paying income taxes are low-income elderly on fixed incomes. Individuals on Social Security with an income of less than $25,000 and couples with an income of less than $32,000 pay no income tax on that money.
- Roughly 15 percent pay no income taxes thanks to “credits for children and the working poor (the child tax credit, the child and dependent care tax credit, and the earned income tax credit).” Pushing those people back onto the income-tax rolls would requiring eliminating those tax breaks. A low-income working couple with three young children, for example, would no longer be able to deduct the cost of providing daycare for their children. That in turn would substantially reduce the financial incentive to work.
- Some 3 percent pay no income tax because their income is derived through Social Security disability, TANF (better known as welfare) or unemployment benefits.
- An estimated 2.6 percent of the 46 percent escape income taxes through “above-the-line” or ATL deductions, most of which are business-related expenses or items such as alimony; or because their income comes from tax-exempt sources such as interest earned from muni bonds.
- Another 2.5 percent escape income taxes because they have relatively low incomes but have significant education expenses, such as college tuition. For example, somebody working his or her way through college would fall into this category.
- TPC offers no data on how many tax units escape paying income tax through bank accounts in Switzerland or the Cayman Islands.
Finally, here are the percentage of tax units in each income level that do not pay federal income taxes, according to TPC data:
- Zero to $10,000: 99.4 percent
- $10,000 to $20,000: 80.8 percent
- $20,000 to $30,000: 60.9 percent
- $30,000 to $40,000: 41.3 percent
- $40,000 to $50,000: 30.6 percent
- $50,000 to $75,000: 14.4 percent
- $75,000 to $100,000: 5.3 percent
- $100,000 to $200,000: 2 percent
- $200,000 to $500,000: 1 percent
- $500,000 to $1 million: 1.5 percent
- Above $1 million: 1 percent
Conceivably, Romney and other Republicans who profess to be so upset about this phenomenon could introduce legislation this very day that would ensure that those making more than $50,000 a year, for example, pay at least something in the form of income taxes. But somehow, despite the passion and the anger that they feel about this issue, they aren’t likely to do so.
I wonder why that would be….
*In his now infamous video, Mitt Romney quoted the number at 47 percent, but 46 percent is the accurate figure.
– Jay Bookman