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International News Title: The Data Behind Romney’s 47% Comments In his comments to fundraisers captured on video, Republican presidential candidate Mitt Romney said 47% of Americans would almost automatically vote for President Barack Obama because they were “dependent” on the government, in part because they received government benefits and paid no federal income taxes. In a press conference late Monday, Mr. Romney said his comments were “not elegantly stated” while at the same time reiterating the main point. Our translation: If you don’t pay federal income taxes, you may not be swayed by a candidate that wants to cut them. Here’s a rundown of the data behind Mr. Romney’s argument, some of which he correctly stated and other parts of which don’t hold up so well. Entitlements: According to the Census Bureau, 49% of Americans in the second quarter of 2011 lived in a household where at least one member received a government benefit. (The total population at the time was 305 million). That’s up from 30% in the 1980s and 44.4% in the third quarter of 2008, a recent growth in part attributable to the bad economy of President Obama’s first term. The Census Bureau broke the data down like this: 26.4% of U.S. households had someone enrolled in Medicaid (the health-care program for low-income Americans) 16.2% of households had at least one member receiving Social Security. 15.8% lived in a household receiving food stamps 14.9% had a member with Medicare benefits 4.5% of households received assistance with their rent 1.7% had a member receiving unemployment benefits. The large majority of Medicare and Social Security recipients have paid payroll taxes in many cases for decades to qualify for those benefits. More In 2012 here can be a lot of overlap in which programs benefit certain households. For example, millions of people receiving Social Security benefits also receive Medicare health benefits. Many Americans covered by Medicaid are also receiving food stamp benefits. Mr. Romney implied that anyone receiving government benefits wouldn’t likely be one of his voters. But there’s no clear partisan split among beneficiaries, especially for broad-based federal retirement and health-care programs. Taxes: Mr. Romney correctly noted that nearly half of Americans pay no federal income tax. Who are all these people? And how did we get here? Here’s a quick answer. Roughly half of U.S. households that pay no federal income tax are exempted because of basic provisions such as limitations on tax for low-income earners, according to a 2011 study by the nonpartisan Tax Policy Center. The other half benefit from targeted breaks (known to tax geeks as “tax expenditures”), such as assistance for the working poor and for children in moderate-income families. Seniors also benefit from some of these targeted breaks. To analyze which breaks are most important in moving people off the income-tax rolls, the TPC study arranged these tax expenditures into eight categories: Elderly tax benefits (the extra standard deduction for the elderly, the exclusion of a portion of Social Security benefits, and the credit for the elderly); Credits for children and the working poor (the child tax credit, the child and dependent care tax credit, and the Earned Income Tax Credit); Exclusion of other cash transfers (such as welfare and disability payments); Tax-exempt interest and some other deductions, such as for retirement savings; Itemized deductions; Education credits; Other credits; and Reduced rates on capital gains and dividends (zero rate on gains and dividends that would otherwise be taxed at 10% or 15%, 15% rate combined with credits). The TPC found that of the 38 million households that are made nontaxable by tax expenditures, “44% are moved off the tax rolls by elderly tax benefits and another 30% by credits for children and the working poor.” So how did we get to the point where almost half of American households pay no income tax? Since the 1970s, Congress and successive presidents have begun creating more and more tax breaks to benefit broad swaths of the population (and some very narrow gauges too). Democrats generally have been more supportive of the particular breaks that push people off the income-tax rolls, but Republicans have supported a few too, and they also have pushed breaks that benefit higher-income people. More In Taxes The basic exemptions for very low-income people have been around for a while and are pretty non-controversial. Many of the breaks that benefit the elderly also have been supported by members of both parties, who realize older Americans are among the most consistent voters. Breaks for military personnel – such as the exemption for combat pay – also are widely popular. The real partisan division has come over the growing number of other breaks, particularly those for children and for the working poor. Democrats in the 1970s pushed through the first and still arguably the most important of these, the Earned Income Tax Credit. Essentially, it’s an income supplement for the working poor, and can provide several thousand dollars in extra cash each year for a typical eligible family. Over the years it’s been significantly expanded, most recently in the 2009 stimulus bill. While Republicans generally have been supportive of the EITC in practice, they have opposed several of the expansions and also are concerned about relatively high levels of erroneous payments under the highly complex EITC rules. Conservatives tend to focus on the number of people not paying federal income taxes to make a case about the state of American democracy. For example: If half the country has no financial stake in decisions made in Washington, they’ll inevitably end up supporting expensive federal policies. And the burden will fall on everyone else. (That tends to overlook the fact that nearly two-thirds of households that paid no income tax still paid payroll tax, according to the Tax Policy Center.) Republicans, however, did help push through another big break—the child credit. It’s been aimed at helping moderate-income families, including one-earner couples, afford to have kids. Like the EITC, it’s a “refundable” credit – meaning that it is paid to eligible taxpayers even when their tax liability has been erased. Democrats have pushed to make it more broadly available to lower-income people, often over GOP objections.
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