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Posted by Dale Hansen on Fri, Feb 4, 2011 at 2:15 PM

47% of American taxpayers pay no taxes

Republicans like to tout that 47% of American taxpayers pay no taxes. This number is from a report by the Tax Policy Center. What I don't understand is why they think this is an important number.

It runs counter to their belief in trickle down economics since this percentage was mainly stagnant until the Bush tax cuts were enacted and the number moved from 25.2% in 2000 to 46.9% in 2009. The rich have never been richer and taxes have never been lower, which is the exact cocktail required for trickle down economics to work. Yet the economy remains weak and the disparity between the wealthy and the poor keeps growing ever larger.

Having said that, there is plenty of better data working against trickle down economics and I'm really more interested in the 47% number. The first issue is that the federal income tax is not the only tax we pay, obviously. Many of the people who don't pay federal income tax do pay Social Security and Medicare taxes as well as gas and sales taxes. These taxes tend to favor the rich, since a higher percentage of a poor person's income goes to pay these taxes.

Let's focus on who makes up the 47%. There are around 135 million tax filing units currently. Of the 135 million, 21 million people receive the Earned Income Tax Credit (EITC), and around 19 million elderly pay no taxes. The EITC was a policy of the Nixon Administration and expanded by Ronald Regan and George W. Bush. Reagan and Bush expanded the program as part of the tax cuts they wanted to enact. This is also true of the recent tax cuts by President Obama.

So on one hand you have Republicans calling for tax cuts and then on the other they lament the fact that thanks to their tax cuts fewer people pay federal income tax.

Similarly nearly half of all elderly don't pay federal income tax. They too have tax breaks that help limit their burden. According to the Tax Policy report, the elderly make up the second largest portion of Americans who pay no taxes, only slightly behind Americans between the ages of 18-24. Is the hope of Republicans to raise taxes on the poor, the young, and the elderly to offset the tax cuts for the rich?

One item that I have not heard when talking about the 47% of Americans who don't pay taxes is how many of them are the rich and super rich. The answer is 1.5% of American taxpayers making over one million dollars a year don't pay any taxes. This is also true of 2% of Americans making between $200,000 and $1 million and 3.5% of Americans making between $100,000 and $200,000. If it is unfair that some of the poor, the young, and the elderly don't pay taxes, then it must certainly be unfair that portions of the rich and super rich do not either.

The response that I most often get from Republicans on tax rates is that no one should pay taxes or that we should use a fair tax. I'm fine with debating those ideas as well, however, neither of those arguments is represented in the talking point that is the 47%. It is a statistic that proves nothing, supports no position and indicates no tax policy preference.

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