With the revelation that Mitt believes 47% of Americans are dependent on the government, it is clear that the Republican nominee is campaigning not on reality, but on discredited talking points.
The 47% number comes from the old “We are the 53%” anti-Occupy slogan attempted last fall. The claim is that 47% of all Americans don’t pay any taxes. The Wall Street Journal called these the Lucky Duckies before Occupy Wall Street changed the rhetoric in this nation. They based their argument on a very narrow tax interpretation, namely just income taxes, ignoring as a result payroll taxes, excise taxes, sales taxes, tariffs, gift taxes, unemployment taxes, state income taxes, property taxes, and self-employment taxes. That’s an awful lot of taxes to just happen to forget. This remains an attempt to classify people who are poor as freeloaders or vagrants, rehashing the arguments used in years past as “Cadillac Welfare Queens.” Same argument dressed in new clothing.
But, until the Bush tax cuts, this group did, indeed, pay income taxes, although only a small amount. Bush’s tax advisers designed his tax cuts so that the bottom 50% of income earners would have their taxes cut to the point that their deductions would be roughly equal to the taxes owed, effectively eliminating the income tax. They did this by increasing the child eligible credit, and expanding the earned income credit to cover more people than ever. Now, the man who proclaimed that we must save the Bush tax cuts is attacking people for not paying the taxes which were cut by the Bush tax cuts.
So, what do these 47% actually pay in taxes? Turns out, a lot. For the bottom 20%, those averaging ~$13,000 a year, they pay about 17.4% of their income in taxes. This is far higher than Mitt Romney did last year. This group made up only 3.4% of the total income, despite being the bottom 5th of the population. Compared to the top 1%, who earned 21% of the total income, there is something very wrong with this picture. Once you incorporate wealth, the top 1% has 42% of all wealth in this nation, but pay only 21.6% of all taxes. By comparison, the bottom 20% have less than one half of 1%, yet pay a total of 2.1% of the taxes to support that. You spread it across the spectrum, the bottom 80% have 7% of the total wealth, but pay 36.7% of the total taxes. You start seeing an ugly picture forming.
How does this happen? Because we tax income, not wealth. This works only if people on all ends of the economic spectrum are equal consumers of goods and services. Unfortunately, this is not the case. Those in the bottom-half are more likely to live paycheck to paycheck, without any appreciable savings. Those on the top end, by comparison, are unable to spend fast enough to keep up, it simply is more difficult to spend than to earn. Once you hit this point, instead of spreading through the economy, increasing the GDP through consumption, it begins to pool, leaving the economy and slowing down the entire system.
This mass of wealth becomes dead weight, hurting the nation as a whole, the more and more this wealth concentrates and stagnates. They can only buy so many pieces of art, drink so many glasses of champagne, or eat so many McDonald’s hamburgers. They cannot consume quickly enough to maintain their economic impact. Idle funds turn into mad money, which turns not into productive use, but instead into gambling funds. While some are wise investors, seeking out the next big thing, more often than not, people with wealth game the system. Just as someone who won a large bonus would tend to spend money on a trip to Vegas or a cruise, the idle rich turn to gambling, only for them, the stakes are the national economy. Driving up commodity and stock prices before the big cashout, causing the value to crash. If they lost $8 million, no big deal. But the billions in lost value impact the rest of the country instead.
The reasoning behind the high marginal tax rate for half of the past century was to prevent the pooling of this wealth, to prevent the idle funds from being used in this manner. Whenever wealth is allowed to pool, instead of going through the system, the result is always the same; large market bubbles followed by gigantic crashes. The more idle the wealth, the larger and more numerous the bubbles along with the more dramatic the crashes. You have market instability, economic crashes, and direct harm to the engine which drives the economy, the middle class.
- Top 1 Percent Control 42 Percent of Financial Wealth in the U.S. – How Average Americans are Lured into Debt Servitude by Promises of Mega Wealth.
- “The Non-Taxpaying Class: Those lucky duckies!” The Wall Street Journal 20 November 2002
- The 53% Myth: Working Poor Pay More Of Their Income In State And Local Taxes Than The Rich In 49 States
- Memo To Mitt Romney: The 47% Pay Taxes Too
- Why Some Tax Units Pay No Income Tax
- Who Pays Taxes in America?
- The Myth of the Non-Paying 47 Percent
- The Milken Institute Review Q1 2012
- Misconceptions and Realities About Who Pays Taxes
- How We Pay Taxes: 11 Charts
- Coming Soon: ‘Taxmageddon’
- The GOP’s Weird Obsession With Poor People Not Paying Enough Taxes
- Getting the Facts Straight on America’s Tax Burden
- The New Jet Set