With all the talk about the 47% we thought it would be helpful to share this Washington Post opinion piece posted on the Brookings website:
Five Myths About the 47 Percent
1. Forty-seven percent of Americans don’t pay taxes.
The most pernicious misconception about people who don’t pay federal income taxes is that they don’t pay any taxes. That oft-heard claim ignores all the other taxes Americans encounter in their daily lives. Almost two-thirds of the 47 percent work, for example, and their payroll taxes help finance Social Security and Medicare. Accounting for this, the share of households paying no net federal taxes falls to 28 percent.
And those aren’t the only other taxes they bear. According to economic research, the corporate income tax discourages domestic investment; that depresses wages, so workers are effectively paying some of the corporate tax. More directly, many households pay federal taxes on gasoline, beer and cigarettes. And then there are state and local sales, property and income taxes — all of which are often less progressive than the federal income tax. Putting all these together, a family of three with an income of $30,000 would owe no federal income tax (in fact, they would get money back). But they could easily pay more than $4,500, or 15 percent of their income, in taxes.
2. Members of the 47 percent will never pay federal income taxes.
Politicians and commentators often talk about those who don’t pay income taxes as though they’re in a special club with lifetime membership. In fact, it’s a highly diverse group, some of whom move in and out from year to year.
When they first join the workforce, for example, young people may not earn enough to pay federal income taxes. The same is true for many of the temporarily unemployed, working parents and entrepreneurs whose businesses experience a loss. But most of these people look forward to the day, perhaps in just a year or two, when their incomes will rise and they will join or rejoin the 53 percent of Americans who do pay federal income taxes.
The reverse is true for many senior citizens: They may pay no federal income tax in retirement, but most did during their working years.