I have only a little bit to add to Ezra Klein's explanation of how Romney can say that 47% of Americans don't pay taxes. The two things I'll add below are (1) an explanation of what "payroll tax" means, and (2) the point that this just demonstrates that our economy includes a large number of jobs for which our current tax system (mostly put in place by Republicans) has deemed it imprudent to require Federal Income Taxes. We can call those people "takers" if we want, but they've taken the jobs in our economy that nobody else wants.
The one thing Klein doesn't do is explain what payroll tax is, and that's unfortunate, because the term is ambiguous and therefore inherently confusing. Here's what Wikipedia says:
"Payroll tax generally refers to two different kinds of similar taxes. The first kind is a tax that employers are required to withhold from employees' wages, also known as withholding tax, pay-as-you-earn tax (PAYE), or pay-as-you-go tax (PAYG) and often covering advance payment of income tax and social security contributions. The second kind is a tax that is paid from the employer's own funds and that is directly related to employing a worker, which can consist of a fixed charge or be proportionally linked to an employee's pay. The charges paid by the employer usually cover the employer's funding of the social security system."
So technically, if my income tax is being withheld, then I'm paying payroll tax. But it's also possible to pay payroll tax without having income tax withheld. In that case, money is withheld from my paycheck to help finance the costs of employing me in the first place, and this can include Social Security and Medicare, but not necessarily income tax. It's that latter class of people that make up the 28% in the chart above.
So it's apparently perfectly accurate to say these people (more accurately, households) don't pay income tax. They don't. And it shouldn't surprise us that they have jobs -- obviously, we don't have an unemployment rate of 47%. All that means is that they are the working poor, or at least the working "pretty poor." They make enough money to take them out of "unemployed" statistics, but not enough for the government to think they need to be taxed. Interestingly, (according to Klein) the growth of this segment of the population seems to be attributable to Republican tax cuts under Reagan and Bush 2 -- in the course of cutting taxes for the rich, they also cut taxes for the working poor.
When I say working poor, I note that this segment -- or at least some of it -- does make over $20K per year (a separate slice of the pie is the 6.9% who make less than that). [It's hard to say for sure how the pie chart handles overlap between these two slices -- i.e. there are presumably people who make less than 20K per year AND pay payroll taxes -- do they count for the 28.3 percent, or the 6.9%? Or are they double counted?].
So where does that leave us? In a way, Romney is right. There are 47% of people who don't pay Federal Income Tax, who presumably benefit from government programs funded by other people's income taxes. Yes, they pay other kinds of taxes -- state taxes (including the very regressive sales tax), as well as Federal Medicare and Social Security taxes -- but that's not relevant to the Republicans' basic point, about them benefiting from programs that they didn't contribute to (or in the case of the elderly, aren't currently contributing to). So technically one could call these people "takers" not "makers."
But the reason for that is that they are doing the jobs that nobody else wants to do -- the thankless, low-paying jobs. Apparently, that's somewhere on the order of 28.3% of all jobs in our economy. For whatever reason, our tax system says that people in that kind of job don't need to pay Federal Income Tax. Does Romney plan on changing that? If so, how?! Is he going to start taxing these people? If he does that, then why would these people -- who presumably can barely make ends meet as it is -- even take these jobs?
And if we need to provide these people with subsidized health care so that they can stay in these jobs, isn't that something we should do? [Of course, as I've said elsewhere, ObamaCare might not have been the right way to do it, but that's a different story].
So Romney may well be right that he's not going to be able to reach 47% of the voters, since apparently he recognizes that his platform is going to hurt them. If I were in one of those classes, I'd be very scared of what the Republicans might do. But I'm not (thankfully), and I'm still very scared. Sorry Mitt.
Here's another chart, also from Citizens for Tax Justice (via the WashingtonPost):
"Payroll tax generally refers to two different kinds of similar taxes. The first kind is a tax that employers are required to withhold from employees' wages, also known as withholding tax, pay-as-you-earn tax (PAYE), or pay-as-you-go tax (PAYG) and often covering advance payment of income tax and social security contributions. The second kind is a tax that is paid from the employer's own funds and that is directly related to employing a worker, which can consist of a fixed charge or be proportionally linked to an employee's pay. The charges paid by the employer usually cover the employer's funding of the social security system."
So technically, if my income tax is being withheld, then I'm paying payroll tax. But it's also possible to pay payroll tax without having income tax withheld. In that case, money is withheld from my paycheck to help finance the costs of employing me in the first place, and this can include Social Security and Medicare, but not necessarily income tax. It's that latter class of people that make up the 28% in the chart above.
So it's apparently perfectly accurate to say these people (more accurately, households) don't pay income tax. They don't. And it shouldn't surprise us that they have jobs -- obviously, we don't have an unemployment rate of 47%. All that means is that they are the working poor, or at least the working "pretty poor." They make enough money to take them out of "unemployed" statistics, but not enough for the government to think they need to be taxed. Interestingly, (according to Klein) the growth of this segment of the population seems to be attributable to Republican tax cuts under Reagan and Bush 2 -- in the course of cutting taxes for the rich, they also cut taxes for the working poor.
When I say working poor, I note that this segment -- or at least some of it -- does make over $20K per year (a separate slice of the pie is the 6.9% who make less than that). [It's hard to say for sure how the pie chart handles overlap between these two slices -- i.e. there are presumably people who make less than 20K per year AND pay payroll taxes -- do they count for the 28.3 percent, or the 6.9%? Or are they double counted?].
So where does that leave us? In a way, Romney is right. There are 47% of people who don't pay Federal Income Tax, who presumably benefit from government programs funded by other people's income taxes. Yes, they pay other kinds of taxes -- state taxes (including the very regressive sales tax), as well as Federal Medicare and Social Security taxes -- but that's not relevant to the Republicans' basic point, about them benefiting from programs that they didn't contribute to (or in the case of the elderly, aren't currently contributing to). So technically one could call these people "takers" not "makers."
But the reason for that is that they are doing the jobs that nobody else wants to do -- the thankless, low-paying jobs. Apparently, that's somewhere on the order of 28.3% of all jobs in our economy. For whatever reason, our tax system says that people in that kind of job don't need to pay Federal Income Tax. Does Romney plan on changing that? If so, how?! Is he going to start taxing these people? If he does that, then why would these people -- who presumably can barely make ends meet as it is -- even take these jobs?
And if we need to provide these people with subsidized health care so that they can stay in these jobs, isn't that something we should do? [Of course, as I've said elsewhere, ObamaCare might not have been the right way to do it, but that's a different story].
So Romney may well be right that he's not going to be able to reach 47% of the voters, since apparently he recognizes that his platform is going to hurt them. If I were in one of those classes, I'd be very scared of what the Republicans might do. But I'm not (thankfully), and I'm still very scared. Sorry Mitt.
Here's another chart, also from Citizens for Tax Justice (via the WashingtonPost):
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