April 18, 2024

Economix Blog: Behind the ‘People Who Pay No Income Tax’

Mother Jones has published a video of Mitt Romney at a private fund-raiser making incendiary remarks about Obama voters – and, well, about half of the electorate.

“There are 47 percent of the people who will vote for the president no matter what,” Mr. Romney said. “There are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it, that that’s an entitlement. And the government should give it to them. And they will vote for this president no matter what.”

“These are people who pay no income tax,” he added.

I’ll address just that last part in this post.

Mr. Romney is absolutely correct that about half of American households do not pay federal income tax. (He is also tapping into a now long-running vein of conservative anger at those households.) But he is missing some crucial context on why they do not pay federal income tax.

The nonpartisan and highly respected Tax Policy Center derived the 47 percent number – it is actually 46 percent, as of 2011 – and published an excellent analysis of it last summer.

It found that about half of the households that do not pay federal income tax do not pay it because they are simply too poor. The Tax Policy Center gives as an example a couple with two children earning less than $26,400 a year: The household would pay no federal income tax because its standard deduction and other exemptions would simply erase its liability.

The other half, the Tax Policy Center found, consists of households taking advantage of tax credits and other provisions, mostly support for senior citizens and low-income working families.

Put bluntly, these are not households shirking their tax liabilities. The pool consists mostly of the poor, of relatively low-income working families and of old people. The tax code is specifically designed to reduce the burden on them.

Indeed, the recession and its aftermath have left tens of millions of workers out of a job or underemployed, removing more households from payment of federal income taxes. Moreover, the Bush tax cuts – the signature Republican economic policy of the 2000s, which doubled the child tax credit, increased a number of other deductions and exemptions, and lowered marginal tax rates – erased millions of families’ federal income tax liabilities.

It is also worth noting that though tens of millions of families do not pay federal income taxes, there are virtually no families that do not pay any taxes – between payroll taxes, sales taxes, state and local taxes, and on and on.

For much more detail on the 46 (or 47) percent, read my colleague David Leonhardt’s 2010 column or my 2011 piece for Slate.

Article source: http://economix.blogs.nytimes.com/2012/09/17/the-reasons-behind-the-people-who-pay-no-income-tax/?partner=rss&emc=rss

Economix Blog: Nancy Folbre: Overclass vs. Underclass


Nancy Folbre is an economics professor at the University of Massachusetts, Amherst.

The middle class looks nervously up, then down. Which is the greater economic threat, the overclass or the underclass? Perceived answers to this question now shape political allegiances in the United States.

Today’s Economist

Perspectives from expert contributors.

Not that the middle class is sure where its boundaries lie. Much depends on what other labels are offered – such as working class or upper middle or lower middle rather than just plain middle.

But whatever its exact size, the middle class is usually considered more deserving – and more threatened – than those at the extremes. Those on the left argue that the overclass threatens the country’s well-being, while those on the right point their fingers at the underclass. President Obama wants to raise taxes on millionaires; Republicans want to cut social programs directed at the poor.

Occupy Wall Street accuses the top 1 percent of greed; Tea Party conservatives accuse welfare recipients of sloth, another deadly sin.

Greed is often personified by vampires, strong, sexy superhumans with mesmerizing powers who suck the life blood from their unwitting victims.

In 2004, The Village Voice published a cover image of George W. Bush sinking his fangs into the neck of a fainting Statue of Liberty, inspiring a similar image on the April 2011 cover of Mother Jones. In the pages of Rolling Stone, the journalist Matt Taibbi famously described the investment bank Goldman Sachs as a “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”

Sloth and incompetence are often personified by zombies, the living dead, mumbling, stumbling creatures that gain strength only in numbers. These are less a threat to specific individuals than to civilization as a whole.

Jason Mattera’s recent book, “Obama Zombies,” asserts that “Barack Obama lobotomized a generation.” A local Republican group in Virginia aroused controversy at Halloween by publishing an image of the commander in chief as a zombie with a bullet hole through his skull. One conservative blog post explicitly refers to African-American entitlement zombies.

Government employees are often tagged zombies, and Ron Paul, a Republican presidential candidate, applies the term to those who pay income taxes without complaint.

Maybe the vampire/zombie imagery reveals the impact of psychology on economic perceptions – some people fear most the dominance, some the dependence of others.

Vampires aren’t all bad. Some can be redeemed by human love, as in the “Twilight” saga. Others could learn to subsist on synthetic blood rather than emptying their friends. Likewise, zombies can be cured or used to enliven Jane Austen novels.

Still, the horror show on both sides testifies to class anxiety in the face of economic stress. It also illustrates the many ways that economic incentives can go awry. Offer huge rewards to winners of a competition and you will likely elicit greater effort and innovation – up to a point. On the other hand, you will also increase the temptation to collude and cheat.

Offer public assistance to those who can’t support themselves, and you will help protect and develop their capabilities – up to a point. On the other hand, you will also increase the temptation to lie and shirk.

No economic system can eliminate both forms of misbehavior, but a good one should surely try to discourage both.

Many people, including me, have decided that the overclass poses the most serious threat today to the middle class in the United States because it markets the assertion that the underclass is the source of all our problems.

What the middle class decides will depend on its assessments of the relative threats of increasingly concentrated wealth at the top versus growing economic desperation at the bottom.

It will also depend on whether the middle class believes it can climb the economic pole. Right now, it appears to sliding down. And its white collars appear to be slightly stained with blood.

Article source: http://feeds.nytimes.com/click.phdo?i=297c6de93c54d77b1cfc436ceb634606