It began as a retort and became a fear. For years, when liberals would accuse conservatives of cutting taxes for the rich, our main argument was that low marginal tax rates on high earners were good for the economy. But we would also respond that rich people actually pay a large share of all income taxes. Over time, many conservatives grew convinced that the true fairness issue raised by the tax code is that this share is too large — and, even more, grew alarmed by how many people were not paying income taxes.
That 47 percent of all tax filers have no income-tax liability is now one of the most widely known statistics on the right. (Actually, according to the Tax Policy Center, the figure was 47 percent in 2009 and will be 46 percent for this tax year, but 47 is the number that has lingered in the public debate.) Economist Michael Boskin, a veteran of Republican administrations, fretted in a recent Wall Street Journal op-ed that tax policy “can create a majority paying nothing and voting more spending at the expense of a taxpaying minority.” When he announced his presidential campaign, Texas governor Rick Perry said, “We’re dismayed at the injustice that nearly half of all Americans don’t even pay any income tax.” Michele Bachmann, also running for the Republican nomination, says she will reform taxes so that everyone pays some amount in income taxes.
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Rep. Paul Ryan of Wisconsin echoes this concern. “We’re coming close to a tipping point in America where we might have a net majority of takers versus makers in society and that could become very dangerous if it sets in as a permanent condition,” he said in a recent speech to the Heritage Foundation.
This point of view has even inspired a bit of agitprop. In response to left-wing activists’ claim to represent the oppressed “99 percent” of Americans, some conservatives launched a website where people could post statements from “the 53 percent” who pay income taxes. Slogan: “Those of us who pay for those of you who whine about all of that . . . or that . . . or whatever.”
The argument these conservatives are making has two components. First, it is wrong as a matter of civic morality for some people — let alone large numbers of people — to contribute nothing to the support of the federal government. Second, this situation is politically dangerous because it means that, for a large number of voters, big government is, or appears to be, free. These voters will therefore support the expansion and oppose the retrenchment of government, voting themselves goodies at other people’s expense.
The good news is that these fears are overblown. The 47 percent figure does not mean we are near a tipping point. Most of the people included in that figure do make financial contributions to the federal government, and there is no reason to think that nonpayment of income taxes is turning millions of Americans liberal. The bad news is that worrying too much about this number will lead conservatives down an intellectual and political dead end.
According to the Tax Policy Center, provisions of the tax code that exempt subsistence levels of income from income taxes — the standard deduction, personal exemption, and dependent exemption — are the reason for about half of the tax filers who owe no income tax. Another large group of filers pays no income tax because its members are elderly and benefit from such features of the code as the non-taxation of some Social Security benefits. The tax credit for children and the earned-income tax credit, an effort to boost the pay of low-income workers, wipe out income-tax liability for other taxpayers. Those credits are “refundable,” meaning that beneficiaries can get money on top of paying no income tax. Other provisions of the code account for the rest of the 47 percent: education credits, the non-taxation of welfare payments, itemized deductions, and so on.
"The irony here is that FDR deliberately and explicitly introduced the payroll tax to accompany Social Security because it would encourage people to draw this false connection. ... People who pay payroll taxes are funding the federal government, and conservatives who deny it are falling for a trap FDR set for them."
It's not ironic, and it's not falling into a trap. It's forcing the Left to face the logic of the way they present Social Security and Medicare. If we give up the argument that payroll taxes are, in some sense, dedicated to one's own Social Security and Medicare benefits, and therefore irrelevant to the discussion of income taxation, we're disarming unilaterally and allowing the Left to have their rhetorical cake and eat it too. The alternative is to try to convince the public, on all fronts, that payroll taxes are unrelated to Social Security and Medicare. Which would be insane.
"The real “takers” coalition would then include anyone who is a net beneficiary of the federal government."
Very true. Which is why we should strive for a system in which no one is a net beneficiary of the Federal government.
"A desire to cut taxes for people at all income levels, and to oppose tax increases at all income levels, was key to associating conservatism with the diffusion of opportunity in the Reagan years and after. Changed circumstances may demand a different approach than that of three decades ago. They do not compel conservatism to become a creed openly focused on helping one group at the expense of another, a kind of mirror image of egalitarian liberalism."
This seems intentionally obtuse. If the Left has successfully implemented unfair, progressive taxes that victimize one group of people at the expense of another, then the morally right course of action is to try to reverse those policies so that no one is being victimized and no one is free-riding. To categorize both redistribution and the attempt to undo redistribution as "helping one group at the expense of another" is a piece of demogogy I would expect out of Paul Krugman, not an NR writer. I suppose that helping a thief steal someone's property is analytically similar to recovering the property from the thief and returning it to the owner: after all, both are simply "helping one person at the expense of another".
Ponnuru has a couple of preoccupations: trying to be a political strategist, rather than focusing on policy and/or moral philosophy, and trying to move conservatism in a sort of social-populist, anti-libertarian direction. But the energy and coherent philosophy on the Right are driving conservatism in a libertarian direction. If Ponnuru keeps up in this vein, he's just going to marginalize himself, like David Frum did.
In the penultimate paragraph, "victimizes one group of people at the expense of another" should of course read, "victimizes one group of people for the benefit of another".
"Which is why we should strive for a system in which no one is a net beneficiary of the Federal government."
That's mathematically impossible without totally eliminating the Federal Government's buying power and taxing power.
Anyone who is employed by the Federal Government, from an FBI agent to a tour guide at the Capitol Building, is earning more in wages from the Government than they're paying in taxes.
Anyone who is a Government contractor, whether it's Lockheed-Martin delivering fighter jets to the Government or a pizza parlor delivering pizzas for a late-night session, is earning more in the contract than they're paying in taxes from performing the contract.
That's why I said, "strive for". Obviously, some people are going to drive on highways more, use police protection more often, etc. But the aspiration should be a system in which each person's contributions approximate his returns.
Incidentally, I don't think government employees or contractors are a good example, since they're providing goods or services in exchange for the payments they receive.
"It rose, bumpily, back to 26 percent during the Carter years, fell again to 18 percent in 1984, and then began to rise — especially after the Gingrich Congress introduced the child credit. Pres. George W. Bush expanded that credit, and also reduced the 15 percent tax rate that applied to many lower-income workers to 10 percent."
It was not 'Leftists' that made it possible for lower income people not to pay income taxes, it was Republican tax policies that had wide spread conservative support at the time.
Look at it from a system view, where taxes are not the only issue. If you try to identify those voters who have a vested interested in furthering government, levels of taxation are only one component.
In thinging about tipping points, consider also:
Voters who receive government benefits.
Voters who work for organizations receiving government grants.
Voters who work for government.
Voters who work for organizations which do not pursue profit.
If you are not speaking Japanese and have driven on an Interstate at any point in your life, you are a recipient of government benefits.
The problem is not government benefits. The government exists for the benefit of its citizens, it should be providing services that benefit the general population, like national security, emergency response for major disasters, economic regulation, and infrastructure. It has been doing those things since the time of the Founding Fathers.
The problem, rather, is narrowly defined government benefits that only benefit specific groups, rather than the general population. Progressives have made a political strategy out of providing government benefits that provide significant benefits to specific groups, like unionized public sector jobs, public housing, affirmative action, "green energy" tax credits, subsidized tuition, and so forth. The recipients of those benefits then become the basis for special interest groups that are formed to protect them, and Democrats have built their voting blocs out of those special interest groups.
Rather than opposing government benefits, conservatives should oppose government benefits that do not benefit the general population, but support those that do benefit everyone - e.g., oppose transfer payments and preferential treatment for certain groups, while favoring national security, transportation, and sensible regulation. The key question for a benefit should be if everyone receives it to some extent, or if it benefits only a narrowly defined group.
It was a big mistake to allow the child tax credit to create a negative tax liabilty (i.e., a welfare check through the tax code). Now cutting a form of welfare would be viewed, rhetorically, as a "tax increase." Transfer payments are all unconstitutional anyway, though they now amount to a plurality of federal spending.
In the 1970s, Milton Friedman had proposed a negative income tax as an alternative to welfare checks. It's simpler and less bureaucratic. That's basically what the child tax credit is.
There's nothing unconstitutional about a negative income tax. In fact, it happens to anyone whose deductions exceed their income in some year.
The poor are always going to need some kind of public assistance. We don't want to return to the 19th century, when private charities and churches were swamped in times of economic distress, and the poor were reduced to hunger and beggary.
There are still many of us who are non-libertarian conservatives. Remember that William F. Buckley had expelled Ayn Rand and her Objectivists from NR.
"But conservatives should seek to remedy the problem by cutting benefits rather than by raising taxes in the hope it will make people more eager to cut benefits."
I'll bet there were people who used to say that it would be easier to make the moon come to the earth, than to send men to the moon.
If you acknowledge that net beneficiaries of government spending MAY vote for increased government spending, and you acknowledge that in a welfare state with massive deficit spending, "almost everyone" is probably a net beneficiary of govt. spending, then it becomes really REALLY important to know just how likely that "MAY" means. Because if it's 50% or more, then there is NO cutting benefits (since the majority weighs in favor of benefits). But it might be possible to increase taxes (especially if that 50% includes some number of democrats, who love to raise taxes), which might be enough to reduce the number of people who are net beneficiaries of govt. spending, which might be enough to reduce the opposition to cutting benefits to the point where it becomes politically feasible.
You wrote three pages, arguing with your own team, but you're still wrong, and they're still right. Were you just taking the Devil's Advocate position this week because you drew the short straw?
You've got to be bleeping kidding me. Half the country doesn't pay taxes, and welfare income isn't taxed? Nothing you say to excuse those numbers makes me see anything but red. With the exception of the elderly and infirm, we have half the country that needs to get off its duff and contribute. There is no excuse for half the country sitting around collecting. Much less excuse for the country to be actively subsidizing indolence and irresponsibility. There should be a penalty for this behavior, not a reward. I've been paying around $100,000 a year in taxes for the past 15 years, and when I was unemployed I certainly had to pay taxes on my unemployment compensation. There is no excuse for letting half the country off the hook for this basic civic duty.
This article got me thinking about the 47%. That number is the percent that pay NO income tax. What would the number be if we added in all federal employees (military excluded), and the people who paid only an insignificant amount of income tax, say 500 dollars or less. My guess is that that 47% turns into the 53%.
The horse is already out of the barn Ramesh, go check the door.
Mr. Pannuru, you are giving almost every tax filer way too much credit. The worst thing about our tax code is that it is far too complicated for any ordinary person to understand it.
From my experience preparing taxes here is what most people think of them:
1-they work hard and should be able to keep most, if not all, of their money.
2-if they don't have enough money to lead a reasonable life-style the gov't should give them some more.
3-any money needed should come from "the rich".
4-payroll taxes are NEVER thought of, they are not included in the 1040 so why would any low income person even realize they are paying them? Only the highest income earners (who max out) and bookeepers are even aware that employers match the deduction. If anyone does think of these deductions it is, as you say, a thought that they are providing (by their labor) for their old age. I'm sorry, but that is not at all an unreasonable thought.
5-whether they have to pay, get money back, or break even the general consensus is that all politicians are hacks, crooks, or worse. No distinction is made between left and right, republican or democrat.
My particular joy is always those who get large refunds based on such refundable credits as the EITC or Child credit and then say "what has any politician given me".
Conclusion: nobody in the general public is seriously considering any of these issues and boiling them down and making them comprehensible is probably almost impossible. Hence the appeal of "9-9-9" it sounds simple and fair which IS what the public wants, a SIMPLE and FAIR tax code.
But only with the proviso - nobody, but nobody, wants to pay any more taxes. And in that, the public is clearly in the right.
You don't get back more in a tax return than you put in.
While Ponnuru makes the point that all people pay taxes of some sort, but due to exemptions and credits, they get money back, it makes them appear as they pay nothing...
Then lets cap their return to only what they paid in....because to keep up the way they are going now is to do redistribution of income from one group of people (the rich) to another group (the not so rich).
Out current tax system as well as our current government spending has to be re-thought and re-done.
Both are severely out of line with where we are as a nation and where we are technologically.
Many of Ramesh’s arguments look good on paper and are intellectually correct, but they fail to persuade. To borrow a phrase from the NFL pundits, “That is why we don’t play the games on paper.”
I did especially like the line, ironically the portion of the quote Allesnarf omitted in his quote below:
"All federal taxes go to the federal government, and all federal spending comes from it: The rest is accounting, and accounting tricks."
The “47% don’t pay taxes” argument is just a small skirmish in a larger battle or war. It highlights the complexity, irrationality, unfairness, and bureaucratic nature of our current tax system. However, it is more of a “final straw” than the foundation of our beliefs. To focus on this argument in an effort to persuade conservatives is missing the point.
Mr. Ponnuru's arguments do look good on paper and seem intellectually correct. The reason they fail to persuade is that some people prefer their ideology to the facts. Cordially, Bill
It is not anti-intellectualism and it is not a preference of ideology to fact (Bill). It is simply that Ramesh’s facts don’t persuade. It is factually accurate to say that if you drive 56 MPH in a 55 MPH zone, you are breaking the law. Does that mean you deserve a speeding ticket? Most people would say, no. Why not, you technically broke the law?
To buy his argument is to concede that payroll taxes are income taxes. I don’t find that argument persuasive.
