The story goes like this. There are those who make money and pay taxes: The top 10% of earners pay 70% of federal income taxes. And there are those who take money and don't pay taxes: About half of Americans live in households that receive direct government benefits, like Medicare, Social Security, or food stamps. A similar share of the country doesn't owe federal income taxes.
I have three problems with this storyline.
First, if you live in the United States, you're a Taker. It's not the 47%. It's the 100%. Government provides services and benefits that are impossible not to take, from national defense, to infrastructure, to food and drug safety. We're all beneficiaries of not getting invaded, having roads, and not getting poisoned by our dinner and over-the-counter medication.
Second, if you work in the United States, you're a Maker. It's not the 15 million -- that 10% households who owe most federal income taxes. It's the 155 million -- the labor force, not counting the millions of people who want but cannot find a job. It's true that richer people pay more. But they also earn more. The top 1% pays more federal taxes than the bottom 60% combined. That sounds outrageous. But the top 1% also makes more than the bottom 40% combined.
Here are two nice graphs, from Tax Policy Center data. On the left: This is how the income pie is sliced for each quintile. The richest 20% earns more than 50% of the income. On the right: This is how the tax pie is sliced for each quintile. The richest 20% pays about 66% of total federal taxes. Upshot: High income inequality combined with a progressive tax system means the burden of paying for government falls heavily on the top 20%. (These graphs don't include state and local taxes, which are considerably more regressive.)
Third, rather than divide the country into arbitrary and misleading categories of Makers and Takers when all workers are making and all citizens are taking, we should talk about how to make more work to improve the benefits and services we're taking from government.
Conservatism has a long history of contributing creatively and positively to this challenge. Under President Ford, and inspired by policy ideas under another Republican, President Nixon, Congress passed the Tax Reduction Act of 1975, creating the Earned Income Tax Credit. It was an elegant solution to a thorny problem: How do you offer welfare in a way that increases the incentive to work among low-income families? The solution was the EITC: A tax credit that could offset payroll taxes taxpayers as they earned more money. The EITC has become one of the most important, successful, and efficient tax welfare programs in the U.S. It has been extended and expanded under 9 subsequent bills, under Democratic and Republican Congresses.
Smart conservatism is concerned about the very poor. Mitt Romney should be too. I don't think it's unfair to suggest he has some work to do.
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