Brad DeLong: Bill Gale and Donald Marron: Five Myths About the 47 ...

Gale and Marron:

Five Myths About the 47 Percent:

1. Forty-seven percent of Americans don?t pay taxes: The most pernicious misconception about people who don?t pay federal income taxes is that they don?t pay any taxes?. Almost two-thirds of the 47 percent work? their payroll taxes help finance Social Security and Medicare?. [A] family of three with an income of $30,000 would owe no federal income tax? [but] could easily pay more than $4,500, or 15 percent of their income, in taxes.

2. Members of the 47 percent will never pay federal income taxes: Politicians and commentators often talk about those who don?t pay income taxes as though they?re in a special club with lifetime membership?. [Y]oung people? the temporarily unemployed, working parents? entrepreneurs whose businesses experience a loss? look forward to the day, perhaps in just a year or two, when their incomes will rise and they will? pay federal income taxes. The reverse is true for many senior citizens?.

3. Many high-income people game the system to pay no income tax: Our jerry-rigged tax code leaves many Americans with a nagging sense that other people are exploiting loopholes to avoid taxes?. Sadly, there?s an element of truth to that. But gimmickry by high-income taxpayers has essentially nothing to do with who does and doesn?t pay income taxes?. The vast majority of people who pay no federal income tax have low earnings, are elderly or have children at home?. About half of these households don?t pay federal income tax simply because their incomes are low. More than one-fifth are retirees? another one-seventh are [poor] working families with children?. Together, these three groups of taxpayers account for almost 90?percent of the households that pay no federal income tax.

4. The 47 percent vote Democratic: In the leaked video? Romney counts the 47 percent as people who will vote for President Obama ?no matter what.?? [F]ewer than half of individuals in households with incomes below $30,000 voted in 2008?. Romney appears to hold a lead over Obama among elderly voters [who don't pay income taxes], a group that votes enthusiastically.

5. Tax increases are the only way to bring more of these households onto the tax rolls: Romney?s comments about the 47?percent raise the question: If too many Americans pay no federal income tax, how should we reduce that number?? The expansion of the child credit under President George W. Bush in 2001, for example, removed many households from the rolls?. But there is another way. The share of households paying no income tax is near record highs not only because of tax policy but also because of the struggling economy. Higher earnings, particularly for low- and moderate-income workers, would move more Americans into the income-tax-paying category?

Source: http://delong.typepad.com/sdj/2012/11/bill-gale-and-donald-marron-five-myths-about-the-47-percent.html

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