| Ever since the video of Mitt Romney's attack on the 47 percent of Americans who don't pay federal income taxes graced the Internet with its presence, the media/America have spent the week trying to figure out who actually pays what in taxes. And the icing on the cake came yesterday, when it was revealed that Mitt Romney (worth about $200 million) pays an effective tax rate of 14 percent - about the same as most middle-class households but far less than most upper-income households. While tax policy is really complicated, and there's plenty of room for debate around the edges, what's clear is that Mitt Romney's finger-pointing at the 47 percent is completely out of line.
Let's start with his leaked comments earlier this week. He was correct that roughly half of Americans don't pay federal income tax. But are they the government-dependent responsibility-shirking leeches he describes? Let's explore:
- Most (two-thirds) of the 47 percent still pay payroll taxes. When you remove that group, it's only 17 percent of Americans who pay neither payroll nor federal income taxes. Payroll taxes are deducted from wages - something Mitt Romney wouldn't know about, because he hasn't earned wages for quite some time (if ever?). So while all of his income comes from investments, he accuses people who work minimum wage jobs of not working hard enough. Lower income people also pay considerable state and local taxes which, unlike the federal income tax system, are regressive, as you can see in this figure from the CBPP:
- The people who don't pay federal income tax or payroll tax are almost entirely seniors, people with disabilities, students or low-income people (as in less than $30,000 for a household). They either can't work, or they're already working.
- The people who don't pay taxes aren't the ones you'd imagine, at least if you listened to what Romney had to say about them. In reality, almost all of the states with the highest rates of non-payers are solidly red states. So the 47 percent of the country he's writing off because they won't take responsibility for their lives? They are, sadly, probably Romney supporters.
Now let's move on to Romney's own tax liability. His 14 percent rate is slightly higher than someone making $35,000 - $60,000 per year. But the top 1 percent of earners are supposed to be paying a rate of 22 percent. And what Romney paid this year is even higher than usual - the Romneys actually claimed more of their charitable giving this year for tax deductions to bump them into a higher tax rate. Why? Because the campaign made a statement in August that he pays a federal income tax rate of at least 13 percent and they needed to make it true.
Though the tax code is not exactly the sexiest of topics, it's becoming a focal point of this election because of what it stands for - a deeper philosophy of how wealth should be distributed in our country. And it's made even more salient by the immense wealth of Mitt Romney, compared to his inappropriately low tax rate. This is someone who doesn't have to work to earn money, making sweeping comments about half of the electorate not working hard enough.
The Republican complaints about fairness are rendered even more useless by a new report from the Congressional Research Service showing that cutting taxes for the top doesn't actually have any impact on economic growth, and in fact increases the gap between the rich and poor. The Center on Budget and Policy Priorities summarizes: "The report found no statistically significant correlation, all the way back to 1945, between the top capital gains or top marginal income tax rates and: (1) economic growth (in real per capita GDP); (2) private saving; (3) investment; or (4) growth in labor productivity. CRS did, however, find a correlation between reductions in these tax rates and greater income inequality." You can draw all the Laffer curves you want, but this finding, building on previous research with similar results, disproves Republican supply-side trickle-down economics. And maybe people like Mitt Romney are the reason that tinkering with the top marginal rate doesn't spur economic growth - because the people at the top don't actually pay in to the system like the rest of us. |
