Presidential candidate Romney essentially said in a leaked video that 47% of Americans are moochers who do not pay income taxes. The 47% figure is one of the common political myths that comes up in the mix of polemical argument. Is there any truth to the figure? Here are the facts:

Who Are The 47% That Pay No Income Tax?

Here is The Tax Policy Center’s breakdown of the 47% figure.  Out of the 47% that did not pay federal income taxes:
  • 28% pay Payroll taxes, such as Medicare and Social Security
  •  Only 19% pay no taxes.

Those who do not pay any taxes are either elderly or poor:

The non partisan Tax Policy Center reports that:
  • Roughly half of the approximately 46% of American households will pay no federal individual income tax in 2011 is  because of basic exemptions for subsistence level income and dependents.
  • The other half are nontaxable because tax expenditures wipe out tax liabilities and, in the case of refundable credits, yield net payments from the government.

Even with all tax expenditures repealed, standard income tax provisions that exempt a basic amount of income would still leave many units nontaxable – including personal exemptions for taxpayers and dependents and the standard deduction.

  • Of all nontaxable units, half would still owe no tax in 2011 if all tax expenditures were repealed and only these standard income tax provisions applied. The other half owes no tax because of tax expenditures.

Most elderly households are excluded from paying taxes on their Social Security benefits, and low-income workers with children can qualify for the Earned Income Tax Credit or the Child Tax Credit. As Keith Hennessey explains, these were major GOP initiatives during the 1990s and 2000s that conservatives touted as vital poverty-reduction measures:

How Many Working Americans Do Not Pay Federal Taxes?

Here is a break down by age brackets.  The drop off in early years and also in the later years shows that those who don’t pay income taxes are either too young or too old to be in the work force, or, if in the work force, do not earn sufficient income.
 Over their full lifetime, the vast majority of workers end up paying income taxes and federal taxes. As this graph  from the Hamilton project shows, it’s mainly students and the elderly who aren’t paying income taxes. The vast majority of people who aren’t dependents pay income taxes during their prime working years, and an even higher percentage of people pay into Medicare and Social Security:

Most people also pay state and local taxes, such as sales taxes. These tend to be more regressive and hit lower-income groups harder. This chart from the Washington Post shows what tax burdens look like when you add up all taxes:

The effective total tax rate graph pretty clearly shows a progressive tax system up to the fourth 20%. Thereafter, the wealthiest have paid less than their fair share. You’ll be hard pressed to find these facts in the public dialogue, however, because it takes analysis and judgement to understand them. Dan Berger explains this in US News:

Without even taking into account the income differences between income groups, all income groups pay about the same share in taxes as they earn as a percentage of total income including the top 1 percent and pay substantially the same tax rates. Because of the differences in income between the top 1 percent and the 99 percent which show that the affluent in the United States make disproportionately more (e.g., the top 10 percent makes 3,000 percent more than the remaining 90 percent and the top 1 percent makes 1,500 percent more than the rest of the 99 percent), these figures are truly astonishing. They are overwhelming evidence that the relative tax burden falls disproportionately on income groups below the top 1 percent and that the tax incidence of all taxes (federal, state, and local) on the 1 percent is unfairly skewed in their favor. 

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