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Defining the ‘47%’: Who’s not paying taxes and why

This news story was published on September 19, 2012.
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Charts showing which U.S. taxpayers had no federal income tax liability in 2011 and which tax credits and deductions they go. Click to view larger.

By Tony Pugh, McClatchy Newspapers –

WASHINGTON — Mitt Romney’s controversial claim that 47 percent of Americans “pay no taxes” and are “dependent upon government” is an overstatement that put his presidential campaign on the defensive Tuesday as it scrambled to explain what he meant.

His comments came to light this week in a secretly recorded video of the Republican nominee speaking at a fundraiser in May. He made the comments while explaining how his campaign would not try to win over staunch supporters of President Barack Obama.

After media outlets began talking about the comments, Romney hurriedly held a news briefing Monday night. He said that his words “were not elegantly stated,” but he refused to back away from them.

“I’m sure I can state it more clearly and in a more effective way than I did in a setting like that, and so I’m sure I’ll point that out as time goes on,” he said.

The claim that nearly half of Americans pay no taxes is based on a 2011 finding from the Tax Policy Center, a joint tax research arm of the centrist Urban Institute and center-left Brookings Institution. The center reported in 2011 that 53.6 percent of an estimated 164 million U.S. households paid some federal income taxes, while the rest — actually 46.4 percent — paid none.

More than 76 million households paid no income taxes last year, according to the Tax Policy Center. But about 60 percent still paid federal payroll taxes that support Medicare and Social Security, said Roberton Williams, a senior fellow at the tax center. Many also paid federal excise taxes, along with state and local sales, property and income taxes.

“So it’s not that they’re not paying any taxes,” Williams said. “It’s just that they’re not paying federal income taxes.”

The reason, he said, is that more than 38 million, or roughly half of the 76 million households that paid no taxes last year, simply didn’t earn enough to have a tax liability under the current tax code.

But it isn’t just low-income households that pay no federal income taxes, Williams said. He estimated that 1,400 millionaires didn’t pay federal income taxes in 2009, with many likely taking advantage of foreign tax credits or charitable donations to lower their tax liability.

“These are things that people do to lower their tax rates,” he said.

Apart from the more than 38 million households that paid no taxes because they didn’t earn enough, the other half of the 76 million without federal tax liabilities are mostly low- to moderate-income families that benefited from special tax deductions targeting specific populations.

Nearly two-thirds of these households — 28.3 million — are made up of seniors and low-income families with children.

In fact, nearly 17 million elderly households paid no federal taxes last year because tax laws allow them to exclude municipal bond interest and some Social Security benefits from their taxable income, Williams said.

Another 11.6 million low-income families with children paid no income taxes because they benefited from the child earned income and child care tax credits, which erased their tax liability. The Earned Income Tax Credit is the nation’s largest anti-poverty program and helps pull the incomes of more than 5 million families over the federal poverty line each year.

The tax credit is just one example of Congress using the tax code to provide financial support for families. The tax cuts enacted under former President George W. Bush, which targeted billions in tax relief for wealthy Americans, also canceled out the tax liability for 7.8 million low- and moderate-income families as well, according to a 2004 study by The Tax Foundation, a nonpartisan tax research group.

In 2010, Romney himself saved $2 million in income taxes because his capital gains income was taxed at a lower rate, Williams said.

“He pays a 15 percent tax rate on his capital gains income as compared to the 35 percent rate that somebody getting the same dollars of income from a job would pay, so he’s benefiting to the tune of 20 percent” in tax savings, Williams said.

Williams said the remaining 10 million households that pay no federal income taxes take advantage of a variety of tax breaks on public assistance.

These include above-the-line deductions taken before you calculate your adjusted gross income; itemized deductions like mortgage interest payments and charitable contributions; education credits; and capital gains and qualified dividend tax rates, which benefit mainly the wealthy.

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25 Responses to Defining the ‘47%’: Who’s not paying taxes and why

  1. Anonymous Reply Report comment

    September 19, 2012 at 9:45 pm

    Katie you are great at what u say, keep it up its so true!!!!!!

  2. yes Reply Report comment

    September 19, 2012 at 8:55 pm

    I might be what he was talking about. I was injured in Iraq and am now on disability, my house is being paid for through HUD, a program for service connected vets. I don’t make enough each month to pay taxes but I also have a family to support. Using another program through the VA I am going back to school and starting my own business at the same time. My son is on SS and SSI for his disability, autistic, so you might say that right now I am very dependent on the government, until I can get my business going. I also see that Obama is very very bad for my country. I do the research and see what he is doing and he is as crooked as they come. The people here that listen to what the dems are saying and take it as gospel need to pull their head out and do the research themselves and then they will see the truth. If everybody did that the only people that would vote for obama are the people he paid too.

  3. WD 80 Reply Report comment

    September 19, 2012 at 8:38 pm

    I am one of the 47%, retired but my income is too low to have to pay income tax. Mr. Romney didn’t have to tell me he doesn’t care about me, I can tell by his policies he doesn’t. We’re even though, as I don’t care about him either.

  4. Sue Reply Report comment

    September 19, 2012 at 8:23 pm

    NO GLOBE GAZETTE for me – Liberal rag – only good for bird cages & bird sh*t !

  5. ED Reply Report comment

    September 19, 2012 at 6:00 pm

    I don’t think Mitt R was talking about retired people on SS. When I myself talk about people playing the system I am talking about the dead-beats that don’t work and have 10 kids to get a raise everytime they have another.

    • Bobby G Reply Report comment

      September 19, 2012 at 9:24 pm

      I don’t think he was talking about disabled people or the elderly or anybody on SS. He was talking about the people that live off the system. And never bothered to look for a job all there lives. Maybe not around here but the large cities like Detroit. It’s a lot easier dealing dope and making babies.

  6. anonymous Reply Report comment

    September 19, 2012 at 4:07 pm

    Oddly enough even though the press is reporting outrage a CNBC online poll shows 76% agree with Romney’s statement. It’s online now. What gives?

    • bodacious Reply Report comment

      September 19, 2012 at 10:11 pm

      Why would 76% of the people agree with him? He basically called 1/2 of those people freeloaders.

  7. LVS Reply Report comment

    September 19, 2012 at 9:52 am

    I am a conservative independent who leans towards the right most of the time. I am not in favor of Romney but consider him the lessor of two evils. However, these comments or at least the way he put them somewhat insults me. I am now retired with Social Security being a major part of my income. (Luckily my S.S. is somewhat higher than the normal.) I worked for what I have and under the current tax laws our CPA said our standard deductions every year more than off set our income so we filed and were approved by the I.R.S not to file Federal Taxes. That does NOT mean we are on welfare. We paid our share of taxes for over 50 years and I really resent the implication that we are freeloaders.

    • Katie Reply Report comment

      September 19, 2012 at 5:19 pm

      I also get social security, but I was not insulted in the least by his statement. I don’t think he was directing his comments towards people who have earned benefits. As far as I was concerned, he was talking about people who are on long-term welfare, out of work, and poor either because there are not adequate job opportunities in this country or they just plain do not want to work. Let’s face it, we all know of people who are ABUSING the system as a way of life. I sure do. If people are not motivated to have a better life because of lack of job opportunities, are not doing something productive with their lives, they become dependent and that is the segment of our society he was talking about as feeling like victims. People are entitled to government retirement programs. People are NOT entitled to permanent welfare unless they are totally physically or mentally disabled. People who decide to live on welfare forever are not victims, they are moochers off the rest of us. Plain and simple. They are the only ones who should fee GUILTY by what Mitt said. And yes, they should also feel insulted because what they are doing to the rest of us is insulting. I’m tired of supporting another family.

      • Anonymous Reply Report comment

        September 19, 2012 at 5:36 pm

        Alright I’m the same anonymous that said I enjoy this Katie person’s comments but now I’m going further and think she should run for office. Skip the lower level stuff and go right to the Senate or something. We need her rational thinking skills combined with knowledge. Common sense in Washington, what would that be like?

      • Katie Reply Report comment

        September 19, 2012 at 10:33 pm

        LOL. Most voters would hate me because I’m NOT politically correct enough for them. I’m way too blunt and no one in DC would work with me because I would not play well with others!

      • Bobby G Reply Report comment

        September 20, 2012 at 12:03 am

        Did you see that story about 6 million people will be paying a tax for not having insurance. When a lot of people realize there going to get it for free. Look out. Remember the lady that said she was voting for Obama because he gives her free stuff. This is not free unless your living on the system. And I don’t mean SS and Disability. Just all out lazy. Good comment Katie.

      • Not Anonymous Reply Report comment

        September 20, 2012 at 4:24 am

        If Romney can’t effectively communicate what he “means”, he should not be elected.

      • matt Reply Report comment

        September 20, 2012 at 8:10 am

        Get out the red marker. Should fee guilty??? WTF? And you’re the grammar and spelling cop?

        Damn North End!

      • Katie Reply Report comment

        September 20, 2012 at 6:11 pm

        LOL. I read things about 5 times before I send them, but my eyes aren’t perfect and I do miss some things. I also edit, rewrite, and sometimes mess things up. Sorry!

      • anonymous Reply Report comment

        September 20, 2012 at 7:58 pm

        Katie the party you will be supporting would never elect you because you don’t believe in God. Don’t you know that atheists have no morals. They elect plenty of opinionated and stubborn people that don’t play well with others. The God thing is the deal breaker.

      • anonymous Reply Report comment

        September 21, 2012 at 7:20 pm

        He used the 47% because if he only talked about the real dead beats that is only about 14% and that wouldn’t get all you right wing loons excited. So which is it if he wasn’t including you then he was lying about the 47% or was he including you and telling the truth?

  8. really anonymous Reply Report comment

    September 19, 2012 at 9:21 am

    I have worked for over 25 years. I have a college education. I was what is too commonly titled a budgetg cut. For the first time in my life I was out of work. It is rough out there. I do not receive food stamps, or medicaid. I have insurance through my spouse. But we are a two income family, and it was difficult trying to make ends meet with unployment. This is the first time I have ever had any kind of government assistance. I AM part of this 47% and it angers me and I do take offense!

    • Katie Reply Report comment

      September 19, 2012 at 5:30 pm

      You are one person who should vote for Romney. Obama has done nothing about creating jobs. His stimulus was an abysmal failure. He knew nothing about economics whereas Romney has an MBA. Obama has proven that he can’t get this economy moving, but Romney should be able to. You should not feel insulted by Romney’s statement. He was talking about his chances in the election and tabulating his chances of winning. Your unemployment insurance isn’t dependent on Obama’s winning. There is nothing Romney would like better than to reduce the number of “victims” who are dependent on the government for unemployment, housing, food, and healthcare. He wants a robust economy where more people can succeed. Obama wants an economy where more people are dependent on the rich. What happens when all the rich people leave this country or park all their money offshore?And that will happen if socialism continues.

      • anonymous Reply Report comment

        September 21, 2012 at 7:30 pm

        Bush was a business man and he started the drug entitlement program when the country was already 8 trillion in debt and SSI and Medicaid were known to be going broke. I don’t remember seeing any letters to the editor calling him a socialist and acusing him of ruining this country. But thats typical Republican, Democrat polotics. It is only horrible when the other party is doing it!

  9. badpontiac Reply Report comment

    September 19, 2012 at 8:50 am

    gLOBE GAZETTE – such a nice little democratic newspaper – super anti Romnney/RYan headlines – phooey !

    • happyguy Reply Report comment

      September 19, 2012 at 8:57 am

      Sometimes the truth hurts, doesn’t it?

    • Anonymous Reply Report comment

      September 19, 2012 at 9:59 am

      You would think that being bankrupt and all the complaints from advertisers would clue them into that they might want to lose the bias.