The “Non-Payer” Tax Myth

The Congressional Budget Office (CBO) recently released a report detailing the distribution of income and taxation between 1979 and 2007 that, once again, dispels the conservative myth that half of the country pays no taxes.

Chuck Marr of the Center on Budget and Policy Priorities provides the following analysis.

People in the bottom four-fifths of the income scale pay more in payroll taxes than federal income taxes, on average. The Tax Policy Center estimates that payroll taxes (including both the employee and employer shares) outweigh federal income taxes for 82 percent of households. (Most economists agree that workers pay not only the employee share of payroll taxes but the employer share as well in the form of lower wages.)

Working-poor and middle-class Americans pay a much larger share of their incomes in payroll taxes than high-income people do (see graph). That gap has increased over the past 30 years, the CBO report shows. In addition, the share of federal revenues coming from payroll taxes has gone up while the share coming from income taxes has gone down.

When you count all federal taxes (income, payroll, and excise), even people in the bottom fifth of the income scale are net federal taxpayers, on average. This group, whose after-tax incomes averaged just $17,700 in 2007, paid 4.7 percent of their incomes in federal taxes that year.

As a percentage of their income, everyone, including people who make so little money that they do not have to file income taxes, are paying more in other taxes than those in the top income bracket.

Armed with this knowledge, it’s easier to understand why extending payroll tax-cuts for the middle-class and working poor is an important element of President Obama’s economic agenda. It’s also why the Republicans in congress are blocking something which they would usually, under any other circumstances, chose not to block.

Print Friendly
This entry was posted in Economy and tagged , , , , , . Bookmark the permalink.
  • http://pulse.yahoo.com/_UG4VTFSDVY4K3X5OVHQ7IAY3BE John

    One could say that “100% of the people do not pay Income Tax”*
    *( On the Standard Deduction and Exemption[s])

  • mrbrink

    In a letter dated October 28, 1785, Thomas Jefferson wrote to James Madison of a woman he’d met while exploring the French countryside:

    As soon as I had got clear of the town I fell in with a poor woman walking at the same rate with myself and going the same course. Wishing to know the condition of the laboring poor I entered into conversation with her, which I began by enquiries for the path which would lead me into the mountain: and thence proceeded to enquiries into her vocation, condition and circumstances. She told me she was a day laborer at 8 sous or 4d. sterling the day: that she had two children to maintain, and to pay a rent of 30 livres for her house (which would consume the hire of 75 days), that often she could no employment and of course was without bread. As we had walked together near a mile and she had so far served me as a guide, I gave her, on parting, 24 sous. She burst into tears of a gratitude which could perceive was unfeigned because she was unable to utter a word. She had probably never before received so great an aid. This little attendrissement, with the solitude of my walk, led me into a train of reflections on that unequal division of property which occasions the numberless instances of wretchedness which I had observed in this country and is to be observed all over Europe.

    The property of this country is absolutely concentred in a very few hands, having revenues of from half a million of guineas a year downwards. These employ the flower of the country as servants, some of them having as many as 200 domestics, not laboring. They employ also a great number of manufacturers and tradesmen, and lastly the class of laboring husbandmen. But after all there comes the most numerous of all classes, that is, the poor who cannot find work. I asked myself what could be the reason so many should be permitted to beg who are willing to work, in a country where there is a very considerable proportion of uncultivated lands? These lands are undisturbed only for the sake of game. It should seem then that it must be because of the enormous wealth of the proprietors which places them above attention to the increase of their revenues by permitting these lands to be labored.

    I am conscious that an equal division of property is impracticable, but the consequences of this enormous inequality producing so much misery to the bulk of mankind, legislators cannot invent too many devices for subdividing property, only taking care to let their subdivisions go hand in hand with the natural affections of the human mind. The descent of property of every kind therefore to all the children, or to all the brothers and sisters, or other relations in equal degree, is a politic measure and a practicable one. Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions or property in geometrical progression as they rise. Whenever there are in any country uncultivated lands and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural right.

    The earth is given as a common stock for man to labor and live on. If for the encouragement of industry we allow it to be appropriated, we must take care that other employment be provided to those excluded from the appropriation. If we do not, the fundamental right to labor the earth returns to the unemployed. It is too soon yet in our country to say that every man who cannot find employment, but who can find uncultivated land, shall be at liberty to cultivate it, paying a moderate rent. But it is not too soon to provide by every possible means that as few as possible shall be without a little portion of land. The small landholders are the most precious part of a state.

    Excerpt, “Property and Natural Right.” 1785.

    Concentrated wealth, the rights of labor, progressive taxation.

    Why do Republicans hate Thomas Jefferson?