Taxes and the Right Wing's Big Lie

About three-quarters of households pay more in payroll taxes than in income taxes.

Forty-seven percent.That’s the portion of American households that owe no income tax for 2009. The number is up from 38 percent in 2007, and it has become a popular talking point on cable television and talk radio. 47 percent has become shorthand for the notion that the wealthy face a much higher tax burden than they once did while growing numbers of Americans are effectively on the dole.

http://www.csmonitor.com/Business/Donald-Marron/2011/0728/Why-do-half-of-America...

The true fact — about half of Americans do not pay federal income taxes – often gets transmogrified in public discourse into the decidedly untrue claim that half of Americans pay no taxes. That simply isn’t so. There are many other taxes in our fair land, including payroll taxes, excise taxes, sales taxes, state income taxes, and property taxes. Most people who don’t pay federal income taxes still encounter some of these other taxes.

TPC released a new study that examines why these people end up paying no federal income tax.

The number one reason should come as no surprise. It’s because they have low incomes. As my colleague Bob Williams notes:

A couple with two children earning less than $26,400 will pay no federal income tax this year because their $11,600 standard deduction and four exemptions of $3,700 each reduce their taxable income to zero. The basic structure of the income tax simply exempts subsistence levels of income from tax.

Low incomes (or, if you prefer, the standard deduction and personal exemptions) account for fully half of the people who pay no federal income tax.

The second reason is that for many senior citizens, Social Security benefits are exempt from federal income taxes. That accounts for about 22% of the people who pay no federal income tax.

The third reason is that America uses the tax code to provide benefits to low-income families, particularly those with children. Taken together, the earned income tax credit, the child credit, and the childcare credit account for about 15% of the people who pay no federal income tax.

The actual number of Americans who don’t pay any taxes isn’t half, but 14%. This group of non-taxpayers of any kind is largely composed of the elderly and disabled. The people who don’t pay taxes do so because they can’t work.

The myth that the wealthy are carrying the tax burden for America is used to justify tax cuts for the rich. Conservatives use the inaccurate statistic hand in hand with their, “wealthy are the job creators argument.” One statistic that was intended to demonstrate the loss of income due to the recession, along with the impact of the Obama tax cuts has been distorted and misused to justify a policy of not asking the wealthiest Americans to pay their fair share.

The truth is that 86% of Americans pay taxes. In one recession strapped year (2009), less than half of single filer taxpayers paid federal income taxes.

Millions of Americans are not being told the truth that almost 90% of us pay taxes, and that much of the reason why there were fewer people paying federal income taxes in 2009 was that Barack Obama signed the largest tax cut in US history.

Since the truth undercuts the conservative’s reverse Robin Hood steal from the poor to give to the rich policy, they are going to do their best to keep the facts buried under a mountain of misinformation.

Anytime anyone tells you that half of Americans paid no taxes, do your country a favor and straighten them out. We have the facts. It’s time to tear down this talking point.

It's something the Internal Revenue Service (IRS) tracks annually: the top 400 highest adjusted gross incomes. In 2007, the last year with IRS data, the average income for those 400 was nearly $345 million. Their average federal income tax rate was 17 percent, down from 26 percent in 1992. Meanwhile, the average federal income tax rate for all taxpayers declined from 9.9 percent to 9.3 percent.

The top federal income tax rate is 35 percent, but the top rate on capital gains is 15 percent. Also, there are deductions that most would say are political suicide to touch, such as the mortgage deduction, child deduction, and on and on.

Aside from the fact that most people don't read these statistics, why, therefore, is it so hard to raise taxes on the wealthy? Robert Reich, former U.S. Secretary of Labor, notes that the super-rich will use tax loopholes and deductions anyway, so "the government should aim high." He added that during the 1950s, when the top income tax rate was 91 percent, the rich used loopholes and deductions that reduced their effective top rate by 50 percent to 60 percent.

In fact, some of the wealthy want to pay more. While Senator Orrin Hatch, (R-UT), Republican on the Senate Finance Committee believes that the rich should just voluntarily pay more, there is a group called United for a Fair Economy who believes the rich should be forced to pay more, via higher tax rates. And the members of that group are all rich themselves.

On such rich person, Eric Schoenberg, spoke to AP. He inherited money and has a healthy portfolio from when he was an investment banker. 2009 was a bad year for him; his investments "only" brought him $200K. Normally, he makes "north of half a million a year." In 2009, his bad year, his federal income tax bill was slightly more than $2,000. "I simply point out to people, 'Do you think this is reasonable, that somebody in my circumstances should only be paying 1 percent of their income in tax?'"