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untanglingwebs
El Supremo
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Note to Romney: We're all on the dole
By Kelly Phillips ErbUpdated 1d 10h ago Comments
Republican presidential hopeful Mitt Romney took a public beating today for comments he made that were seen as disparaging poor and middle class taxpayers. Specifically, he said to his supporters at a fundraiser:
Sponsored Links"There are 47% of the people who will vote for the president no matter what. All right, there are 47% who are with him, who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it. That's an entitlement. And the government should give it to them. And they will vote for this president no matter what…These are people who pay no income tax…."
And with that, his campaign was declared dead. But is it really? Is Romney saying out loud (perhaps badly) what many taxpayers have been thinking all along? And maybe, just maybe, is that rhetoric based on differences over what actually constitutes an entitlement?
Take that 47% statistic. It's not news. In 2008, nearly one in three taxpayers paid no taxes or received every dollar back which was withheld; it was, at the time, the highest percentage of nonpayers ever. Until 2009 when the number crept up to nearly 50%. In fact, since 2000, the number of non-payers has increased by 59% even though the number of filers has only increased by 10%.
As those numbers increase, it's easy to simply believe that those non-payers are the lower middle class and the poor, relying on those "entitlements" that Romney referenced. But entitlement is a really interesting concept. Entitlements are generally equated with subsidies --what you and I think of as hand-outs. Welfare, right
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But subsidies come in many guises. Let's take housing as an example. From a tax policy standpoint, can you identify the biggest housing-related "entitlement" or subsidy? It's not Section 8 for the poor. It's the home mortgage interest deduction. The deduction alone costs taxpayers four times more in lost revenue than public housing assistance costs and yet benefits a small number of taxpayers (less than a quarter of all returns filed). Additionally, home mortgage interest deductions are available not only to those who have one home but also to those with two: vacation homes, including yachts and the like, qualify for the deduction. And, unlike some other tax breaks, you can hang onto the mortgage interest deduction even if you make so much money that you are subject to the Alternative Minimum Tax (AMT).
In fact, together with the real estate tax deduction, home-buyer incentives total an astonishing $130 billion per year. And remember that first-time home-buyer tax credit from 2009? It cost taxpayers one billion dollars per month during its run despite a report released by Goldman Sachs economist Alec Phillips that all but about 200,000 of the 1.4 million first-time buyers who claimed the credit would have purchased a home even without the incentive. Tax breaks for buying homes continue to climb even while the numbers of low-income families depending on Housing Choice vouchers or Section 8 Project-Based Rental Assistance (PBRA) remain relatively flat. By the numbers, approximately 3.3 million low-income families benefit from those federal housing programs, while more than ten times those numbers claim the home mortgage income deduction.
As taxpayers, we like our tax breaks. However, tax breaks, those deductions and credits, have, as their immediate result, foregone revenue to the government. It is, on paper, akin to receiving a financial benefit from the government whether in the form of the often abused Earned Income Tax Credit (EITC) or the heavily touted home mortgage income deduction. There's nothing wrong with that; there are no provisions in our tax code that require you to pay more in taxes than you have to. Romney and his base know that well.
What that does mean, however, is that you simply can't equate poverty with entitlements, especially if you're relying on taxpayer statistics. While the poverty level for a family of four in the U.S. is calculated as $22,050, the Tax Code allows families making more than twice that to escape taxation. While most would consider a typical family of four earning income of $51,000 to be middle class, that income level would often result in no tax payments.
Does Romney genuinely believe that half of all taxpayers rely on entitlements and fail to grasp the concept of personal responsibility? I don't think so. I think he's tapping into the anger that many taxpayers — including those in the middle class — feel about continuing to pay out in federal income taxes with very little in the way of control over how those dollars are used. How those dollars are actually spent — and the nature of those entitlements — is actually what's at issue. It's very easy to talk entitlements when you don't have to define them.
USATODAY OPINION
Kelly Phillips Erb is a Philadelphia tax attorney andwrites the Taxgirl blog forForbes.com. |
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Thu Sep 20, 2012 6:19 am |
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untanglingwebs
El Supremo
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USA Today Opinion
Column: Fallacies of Romney's logic
By Joseph Stiglitz
Mitt Romney's acerbic attack against the 47% of Americans who allegedly don't pay income taxes and are dependent on government has rightly given rise to a storm. It suggests that large numbers —Barack Obama's supporters — are freeloaders.
Sponsored LinksThe irony is that it is people such as Romney, who are freeloading: The taxes that he has said he is paying (as a percentage of his reported income) are far less than those with substantially less income. And contrary to what some of them would like to believe, no one makes it on his own. Even if they don't inherit their wealth, success in business requires a rule of law, an educated workforce, a public infrastructure, all of which are provided by government.
Even "innovators" such as Google have done what they did only by building on the work of others . Before Google could create the Internet's most popular search engine, someone had to create the Internet — and it was government that did that.
First, even those who don't pay income taxes pay a host of other taxes, including payroll, sales, excise and property taxes. Many of those receiving "benefits" paid for them —through Social Security and Medicare contributions. They're not free riders. Government has done a better job providing these benefits than the private sector. Let's remember why these programs were started: The private sector left most elderly bereft of support, the market for annuities essentially didn't exist, and the elderly couldn't get health insurance.
Even today, the private sector doesn't provide the kind of security that Social Security provides — including protection against market volatility and inflation. And transaction costs of the Social Security Administration are markedly lower than those in the private sector — not a surprise, since their objective is to maximize these costs. Transaction costs are their profits.
Secondly, many of those receiving benefits are our young — providing them education and health (even if they or their parents don't pay taxes) are investments in our future. America is the country with the least equality of opportunity of any of the advanced countries for which there is data. A child's life prospects are more dependent on the income and education of his parents than in these other countries. While the American Dream may have become a myth, it doesn't have to be that way. Children shouldn't have to depend on the wealth of their parents to get the education or health care they need to live up to their potential.
Thirdly, an efficient system of social protection is an important part of any modern society — necessary to enable individuals to take risks. Again, the market failed to provide adequate insurance; for instance, for unemployment or disability. That's why the government stepped in. Those receiving those benefits typically paid for them, either directly or indirectly, through contributions they or their employer made on their behalf to these insurance funds. But providing social protection against these risks too can make for a more productive society. Individuals can take on more high-return, high-risk activities if they know there is a safety net protecting them if things don't work out. It's one of the reasons that some economies with better social protection have been growing much more rapidly than the United States, even during the recent recession.
Government failure
Fourthly, many of those at the bottom — who have become so dependent on government — are there partly because government has failed in one way or the other. It has failed to provide them with skills that would make them productive, so they could earn an adequate living. It has failed to stop banks from taking advantage of them through predatory lending and abusive credit card practices. It has failed to stop for-profit schools from taking advantage of their aspirations to move up in the world through education.
Finally, we are a community — and all communities help those who are less fortunate among them. If our economic system results in so many without jobs, dependent on the government for food, then government has to step in. Our economic system has not worked in the way it should: It has not created jobs for all those who would like to work. Many of the jobs that have been created do not pay a livable wage.
We do have a divided society. But it is not divided, as Romney has suggested, between those who are free loaders and the rest, even if some of those who are paying taxes are not paying their fair share, and are free riding on those who do.
Rather, it is divided between those who see America as a community, and who recognize that the only way to have sustained prosperity is to have shared prosperity, and those who don't.
Joseph E. Stiglitz, recipient of the 2001 Nobel Memorial Prize in Economics, served as chairman of the Council of Economic Advisers under President Clinton. His most recent book is The Price of Inequality: How our Divided Society Endangers our Future. |
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Thu Sep 20, 2012 6:25 am |
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untanglingwebs
El Supremo
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Column: Romney the tax raiser?
By Kirsten PowersUpdated 1d 11h ago Comments
Who's playing class warfare now?
A secret video from a Romney fundraiser emerged Monday showing the GOP candidate waxing ineloquent about the unwashed masses he seeks to rule. Romney broke things down to his fellow one percenters: "There are 47% of the people who will vote for the president no matter what. All right, there are 47% who are with him, who are dependent upon government, who believe that they are victims…and they will vote for this president no matter what. (T)hese are people who pay no income tax. So our message of low taxes doesn't connect."
Then, incredibly, Prince Romney declared: "(M)y job is is not to worry about those people. I'll never convince them they should take personal responsibility and care for their lives."
Let them eat cake!
Never mind that Romney's flawed reasoning would be akin to accusing military families of supporting Republicans because they benefit from the GOP's protection of defense spending.
Now, Romney got one thing right: Roughly 47 % of Americans don't pay federal income tax. (But they do pay payroll taxes, state and local taxes and sales taxes.) But the conclusions he drew from this are factually unsupportable. The ugliest was that it's because Americans who voted for President Obama don't take "personal responsibility and care for their lives."
Could there be another explanation — other than the old moocher-class trope — for why so many don't pay income taxes? There are actually a slew of them. According to a Tax Policy Center analysis and any other honest assessment of our tax system, the bulk of people not paying taxes are low income families and the elderly
If Romney wants take away tax credits from these people then he should say so. He's a big man behind closed doors when talking to his friends, but will he put forth a tax plan that repeals the Earned Income Tax Credit, for example, which is a primary reason many working Americans don't pay income taxes? Will he address the fact that Gerald Ford was the president who presided over the introduction of the EITC and Ronald Reagan was the president who first expanded it?
Also, here is a fun little factoid from Bruce Bartlett, who served in the Reagan and George H.W. Bush administrations, writing in The New York Times: : "During the 1990s, about 24% of filers had no income tax liability, but this number took a big jump during the Bush Administration as Republicans added a large child credit to the tax code. The percentage of filers with no income tax liability rose to 36.3% in 2008, from 25.2% in 2000."
Many commentators believe the video is damaging for Romney because it reinforces the sentiment that he is an out-of-touch billionaire. But it's so much worse than that. The primary problem that this video raises is that Romney's numbers don't add up
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Multiple analyses have found that Romney's tax plan does not work unless he gets rid of nearly every tax credit in existence for the middle class. The Romney camp has cried foul over these analyses but refuses to offer any specifics to rebut this claim.
Watching this video, it is crystal clear that Romney has contempt for the 47 % of people not paying federal income tax, even though the reason many of them aren't is because of a tax system that the GOP helped create. I asked the Romney campaign if he would get rid of the EITC — his plan says only that he would not expand it — and could not got a direct answer, though was told, "Governor Romney has pledged to focus the bulk of tax code adjustments on upper-income households."
So, what is Romney's solution to this alleged problem of the 47% of government moochers?
Weirdly, Romney claims in the video that people don't like him because of his vision for low taxes when in fact the reason that the 47% don't pay federal income tax is precisely because of a tax system that provides credits so they can keep more of their pay to support themselves, also known as "low taxes."
This video backs Romney into a corner he doesn't want to be in because it demands specifics, something he is largely allergic to, in this case, for good reason. No candidate can get elected trashing middle class tax benefits. Conservatives are claiming this is a debate they want to have. But it's a debate they will lose.
Kirsten Powers is a member of USA TODAY's board of contributors, a Fox News political analyst and a columnist for The Daily Beast.
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Thu Sep 20, 2012 6:32 am |
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