It turns out that the 47 percent are really the 100 percent
Mitt Romney isn't a big fan of the 47 percent of people who pay no federal income tax. But there's a small problem. Romney himself might have been a member of the 47 percent as recently as 2009.
There's no shame in being a member of the 47 percent. At some point of our lives, almost all of us are. As my colleague Derek Thompson pointed out, it's mostly people who are too young, too old, or too poor who have no federal income tax liability. In other words, students, retirees, or the working poor -- particularly those with children who qualify for refundable tax credits. The chart below from the Hamilton Project -- look at the red line -- breaks down who does and does not pay federal income taxes by age. Notice how few people under 25 and over 60 pay federal income taxes.
This isn't a story about makers and takers. It's a story about undergraduates and pensioners.
But there's another group of people who don't pay federal income taxes. That's people who have had a bad year. Some of them have lost their jobs. Some of them have lost money on investments. In either case, they don't have much, or any, income to tax. And that brings us to Romney and 2009. As Joshua Green of Businesweek has speculated, it's possible that Romney suffered big enough losses during the 2008 market crash that he zeroed out his 2009 federal income tax liability. Of course, Romney has claimed that he never paid less than a 13 percent effective federal rate the last decade ... but he refuses to release any tax returns from before 2010. That's not to say that Romney is necessarily lying, just that we have no way to check. Consider that six of the top 400 tax filers -- a group making nearly ten times as much as Romney -- paid nothing in federal income taxes in 2009. It's certainly plausible that Romney was a member of the 47 percent in 2009.
Romney's comments about the 47 percent weren't just baffling because all of us are the 47 percent -- including, perhaps, himself. Romney's comments about the 47 percent were baffling because this is what Republicans wanted. As Ezra Klein notes, Ronald Reagan and George W. Bush's tax cuts are why so many people don't pay federal income tax now. Refundable tax credits like the Earned Income Tax Credit (EITC) are rightly thought of as good conservative tax policy by wonks like Reihan Salam. These credits help the poor, but don't reduce work incentives -- a point research has borne out.
In other words, the 47 percent exist mostly because of Republican policies with Democratic stamps of approval. And they exist because we pay different amount of taxes at different times in our lives. Sometimes we're in school. Sometimes we're out of work. Sometimes we retire from work. Republicans used to think it made sense for us to not pay federal income taxes at these times.
Apparently not anymore.