Uh-oh, the peasants are getting angry… time to lie to them about taxes!
RedState.org blogger Erik Erickson has launched a counterattack to the Occupy Wall Street’s “we are the 99 percent” campaign. Erickson’s retort: “Suck it up you whiners. I am the 53 percent subsidizing you so you can hang out on Wall Street and complain.”
What’s he talking about? This 53 percent figure refers to the share of all households who pay federal income taxes. Far too many people, hearing this statistic, miss the crucially important adjectives “federal” and “income” and take it to mean that nearly half of American households pay no taxes at all. This is clearly wrong. Essentially every adult in the country pays taxes. They pay federal excise taxes when they buy gasoline, they pay state sales taxes when they buy clothes and electronics, they pay local property taxes if they own a house, and they pay federal payroll taxes on every dollar of income they earn – unless they’re lucky enough to earn over $107,000, when Social Security taxes revert to zero.
Federal income taxes, in fact, accounted for only 37 percent of federal taxes and just 20 percent of total federal, state, and local taxes paid in 2010. So why have conservative activists like Erickson tried to privilege the income tax over others? Well, mostly because they’re hoping people think this refers to all taxes. But conservatives particularly dislike the federal income tax because it’s pretty much the only significant part of our tax code that remains progressive – though less so after a decade of Republican-backed tax cuts. (The most progressive federal tax, the tax on large estates and gifts, has been eviscerated over the last decade.)
Most taxes besides federal income taxes are flat or regressive, meaning that lower-income households pay a higher share of their income in these taxes than the rich. Citizens for Tax Justice has a great report that points out that the tax system as a whole is nearly flat – meaning that households across the income distribution are paying about an equal share of their income in taxes.
The 47 percent that pay no federal income tax that Erickson thinks he’s subsidizing are a mix of current taxpayers that just happen to have not made enough income in the current year to have income tax liability, and former income taxpayers (retired households), as explained in this post. Unlike other taxes, the federal income tax intentionally exempts subsistence levels of income from taxation, largely through the standard deduction and personal exemption. The tax code also provides an extra standard deduction for retirees, who face high costs of living, and exempts some Social Security income from taxation. Because of this, and because the effect of the earned income tax credit (EITC – first introduced in the Nixon administration and expanded under both the Clinton and George W. Bush administrations) is to offset payroll tax liability for low-earners, it is true that 18 percent of households (mostly retirees and very low-earning families with children) will face no net federal taxes on income this year. Is it really so offensive that retirees and families with very low incomes are not paying this particular tax?
One wonders where this hilarious attempt to cherry-pick tax stats to divide the world into the virtuous and undeserving will end. According the Tax Policy Center, 90 percent of tax units will pay no capital gains or dividends taxes this year – does this make the rest of us freeloaders? But wait, eliminating all taxes on capital gains and dividends is a prime goal of conservative policymakers – are they trying to replace the undeserving freeloaders with virtuous freeloaders?
Or, are they just trying to mislead people who are angry (with good reason) about the outcomes the economy is producing and threatening to pin some outrage where it actually belongs?
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