Myth Romney's Big Propaganda About Taxes
Here’s an actual fact.
Almost half of all Americans, about 47%, don’t pay FEDERAL INCOME TAXES.
Keep your eye on the pea. It’s under one of the shells. Watch me shuffle them around. The very next time I talk about it, FEDERAL has disappeared. So has INCOME. All that’s left is TAXES.
Then I will say, “Almost half of all Americans, about 47%, don’t pay TAXES.”
That statement is completely false.
We all pay taxes. If we’re working, we pay in for Social Security and Medicare. Every time we buy something we pay sales tax (except in Montana, New Hampshire, and Oregon), usually between 4% and 7%. Local sales taxes run from 0% to 8%. There’s always a special tax on gasoline, 18.4 cents federal, plus state taxes, coming to an average of 48.9 cents, going as high as 69.4 cents. If you own property, you pay property taxes and school taxes. If you rent, the landlord passes those costs on to you. Forty-three states have income taxes, seven of them have a flat tax, and some of those vary by locality.
There are two studies that attempt to combine all that data.
Laurence J. Kotlikoff and David Rapson, Boston University economists, did a study for the National Bureau of Economic Research.
It said, “A 30-year-old couple earning only $20,000 a year has a marginal tax rate of 42.5%, while a 45-year-old couple earning $500,000 pays at 43.2%. …” There are several odd points which step outside this range, but basically, “the average marginal tax rate on incomes between $20,000 and $500,000 is 40.3%, the median tax rate is 41.8%, and the standard deviation of all of those rates is 5.3 percentage points. Basically, most of us pay about 40%, plus or minus 5.3 percentage points.”
The Institute for Tax Justice came up with somewhat different numbers. They said that people at the low end, earning $13,000 a year or less, pay 17.4%. People who earn between a quarter million and one million three hundred thousand, pay the most, 30.4%. Once you earn more than that, your tax rate goes down slightly.
The difference seems to be that the Kotlikoff and Rapson looked at working age adults, the Institute looked at everyone. Tax payments fall off rapidly as people retire. Including them brings all the averages down, but more so at the low end.
Neither study deals with people like Mitt Romney, in the top 1/10th of 1%.
According to his Federal Income Tax returns, he made $21.7 million dollars in 2010, and paid three millionin federal income taxes, just short of 14%. If we added in his other taxes, the way we did for everyone else, that would likely add only another one or two percentage points. He stops paying social security after $110,000, a pittance in relation to $21,700,000. He didn’t make Medicare contributions on most of it, because it was unearned income. Yes, he has a California beach house, a New Hampshire lake house, a Michigan lake house, and a Boston house, but how much can their real estate taxes be compared to their income? How much can they spend on food, clothing, Cadillacs, and horses? At a certain point, the income curve leaves the spending curve behind.
That has them paying about half what average Americans pay in taxes. Average working Americans – a couple earning $20,000 a year, for example – pays a rate two and a half times greater than what the Romneys pay.
That’s the reality.
But if you take that initial fact – 47% of Americans don’t pay FEDERAL INCOME TAXES, and change it to “don’t pay … taxes,” by gosh and by golly, you’ve really got something exciting. You divide the world into the righteous, virtuous, hard-working tax-payers and the leeches.