About that 47 Per Cent

About that 47 Per Cent

  Many Obama supporters are wondering why he didn't dump the 47 per cent issue on Romney during the debate last week. I really don't know why not any more than I know why Romney screwed up the issue in the first place. Perhaps it really isn't much of an issue in the first place even though Romney acknowledges that his comments about the 47 per cent were stupid or ridiculous or some such thing. He didn't put it that way, but that's about what he meant when he "fessed' up" that he was wrong.

  Oh, by the way. How many know what the 47 per cent issue is or, better yet, who the 47 per cent are? Forty-seven per cent refers to the 47 per cent of the tax filing population who do not pay federal income taxes. Yes, they do pay other taxes, federal, state and local (or at least some of them do), but so do the 53 per cent who pay all of the income taxes. In addition, half of the 47 per cent actually get "refund" checks from the  federal government for taxes they don't pay.

  Romney got himself in the weeds by tying the 47 per cent to people who become dependent on the government or do not take responsibility for themselves.  That, obviously, was a confusing and shallow reach. He'll have to explain it just as Obama had to deal with his disdainful comment that half of America "cling to their Bibles and guns." However, there really is an issue here.

  If half the country aren't paying into the single largest source of federal government revenue, there is something wrong with the tax system. It's not really about the individuals although the fewer who pay the tax, the stronger the support for the system. And, the problem is that more and more aren't subject to the federal income tax.

  To be specific, according to a recent article in The Detroit News, in 1996, 76 per cent of returns were taxed; in 2006, 67 per cent were taxed; in 2009, 58 per cent were taxable; and now it's 47 per cent or 46 per cent as some others have reported. It's not just an issue of fairness; it's an issue of revenue, too. How much more can you get out of fewer and fewer people? So, what's going on?

  Again, using the newspaper article source, here's a summary. The tax code is to blame. Deduction and tax breaks are the specifics. For instance, the Bush tax cuts doubled the child tax credit from $500 to $1,000; eliminated the marriage penalty and doubled deductions for couples; increased the earned income tax credit; cut capital gains taxes. Obama's Making Work Pay added a $400 individual deduction and American Opportunity Credit for college is worth $2,500 per student on top of the $4,000 tuition and fees deduction. Plus, standard deductions go up every year.

  In 1996, people with incomes of less than $30,000 made up 99.5% of the non-taxable returns. That dropped to 76% in 2009; people making more than $30,000 went from 1% in 1996 to 17% in 2009; the fastest growth (not percentage) went from about 4,000 returns in 1996 to 476,000 in 2009; more than 1,400 millionaires didn't pay in 2009; 20,000 who made more than $200,000 didn't pay. Obviously, the vast majority who didn't pay (83%) earned less than $30,000, and, as noted earlier, many get money "back". Incomes grow, but so do deductions that affect taxable income.

  These non-payers aren't bad people, or lazy people. They didn't demand anything. It's the political system's way of moving other people's money around and sometimes for good reasons and sometimes just for votes. One would hope that the emphasis at some time will turn toward a reform of a system that is so distorting.