2011-08-08 "'46% in U.S. don't pay taxes' only half the story" by Joe Garofoli from "San Francisco Chronicle" daily newspaper
For some California Tea Party conservatives, it has become a favorite statistic: Nearly half of Americans - 46 percent - don't pay taxes. The number is used to back up their claim that if that many people don't pay taxes, why should the wealthiest individuals pay more?
It is accurate in a sense - 46 percent of U.S. households aren't expected to pay federal income taxes this year.
"But most of those people do pay federal taxes" of some sort, such as payroll taxes, said Roberton Williams, a senior fellow at the Tax Policy Center, a center-left Washington think tank, and co-author of a widely cited report last month on who pays taxes.
Roughly half of those 76 million American households who don't pay federal income taxes are zeroed out because their income is too low, he said, while the other half - of all income levels - pay no federal income tax because of a variety of exemptions and loopholes.
"It's a much more nuanced story than the blatant 'almost half of Americans pay no tax,' " Williams said.
"If you limit it to income tax," he added, it is true that 46 percent don't pay, "but there's a good reason behind it, and we all get benefits from these tax reductions. And disproportionately we get them if we're rich."
Such nuances are getting lost as Congress and the White House enter the next phase of debt-reduction budget battles. As part of the debt-ceiling agreement last week, the law created a special 12-member panel of federal legislators who are charged with trimming $2 trillion more in federal spending in the coming decade.
Tea Party uses statistic -
As that battle heats up, Tea Party leaders - who were pivotal in the negotiations to raise the nation's debt ceiling and avoid an unprecedented default - use the non-taxpayers statistic to rebuff Democrats' proposals to tax wealthy Americans more.
Napa Tea Party coordinator Pam Silleman said that before taking a stand on raising taxes for upper-income Americans or corporations, something should be done about a tax system where "half of Americans don't pay taxes."
When told that a July Quinnipiac University poll showed that 67 percent of respondents thought that an "agreement to raise the debt ceiling should include tax hikes for the wealthy and corporations, not just spending cuts," Mark Meckler of Grass Valley (Nevada County), a co-founder of the national Tea Party Patriots, said, "But those aren't polls of taxpayers."
Such findings shouldn't carry much weight, Meckler said, because polls are usually taken of registered voters - and include some of those 46 percent of Americans who don't pay federal income taxes. If you're not paying taxes, Meckler added, you're probably not going to oppose higher taxes.
But Michael Dimock, associate director of the nonpartisan Pew Research Center, said he's never seen a poll that only includes taxpayers. For starters, he said, it would be impractical to determine who pays taxes and who doesn't.
"Most people are paying some sort of taxes, whether it is state taxes or local taxes or sales taxes. I don't know how you'd determine who is a taxpayer unless you did some sort of audit on each of them," Dimock said. "Our view is that it is public opinion that matters when it comes to policy matters. If you were going to ask a question about Medicare cuts, would you only ask Medicare recipients?"
Among the 46 percent of U.S. households that don't pay federal income taxes, 28 percent of them pay payroll taxes that finance Medicare and Social Security, said Williams, who spent 22 years as an analyst at the nonpartisan Congressional Budget Office.
Eighteen percent of U.S. households pay neither federal income tax nor payroll taxes, Williams said, for a variety of reasons. Those who pay no federal income taxes are predominantly lower-income Americans.
Nearly 80 percent of the U.S. households who pay no federal income taxes earn less than $30,000, Williams' research has found. Many are receiving a variety of tax credits for child care or other benefits.
"The reason we have all these tax breaks is that we - as a people - have decided that we want to do certain pieces of social welfare through the tax system," Williams said.
"We encourage people to go to college by having a tax credit for that. We help families with kids afford the kids by giving them a tax break for that. We help people go to work by giving them the earned income tax credit and the dependent care credit," he said.
But, Williams added, "a lot of the tax benefits are going to wealthiest Americans," and the tax breaks "take their taxes down a lot."
President Obama has proposed raising taxes on those earning more than $250,000 to increase government revenue.
But Sal Russo in Sacramento, the chief strategist with the Tea Party Express, opposes such taxes. "Most people who earn $250,000 aren't rich - they're trying to get rich. And those are the people who are the ones who are going to grow the economy."
This national conversation about tax fairness will intensify before Nov. 23, when the 12-member Congressional panel must come up with a plan to cut spending, and Dec. 23, Congress' deadline to pass a plan.
"The problem with fairness," Williams said, "is that it's very much in the eyes of the beholder."