Most misleading of all is the statement that 49.5 percent of citizens pay no federal income taxes. If you count payroll taxes, then only 18 percent of households pay no direct federal taxes. And don’t forget sales tax and other local and state taxes that most people pay.
From the Center on Budget and Policy Priorities: “When all federal, state, and local taxes are taken into account, the bottom fifth of households pays about 16 percent of their incomes in taxes, on average. The second-poorest fifth pays about 21 percent.” For contrast, Mitt Romney recently stated that he pays about 13 percent in income taxes.
Another reason some people don’t pay income tax is because of the child tax credit and the earned income tax credit, which the Republicans increased in their 2001 tax cut. Most people who don’t pay payroll or income taxes are elderly and, for most of them, the social security benefits are non-taxable and many of them no longer work.
And the other households who don’t pay direct federal taxes? Almost all make less than $20,000 per year. Over the past 30 years, income growth has been going mostly to the top 10 percent and especially the top 1 percent.
On the other end of the spectrum – adjusted for inflation, average hourly earnings have not increased in 50 years.
As a sound bite and popular talking point, saying that almost 50 percent of households pay no federal income taxes and implying that they are “moochers” sadly seems to work for those wanting to manipulate popular opinion, but it surely doesn’t tell the whole story.