Mitt Romney was wrong when he said the 47 percent of Americans who pay no federal income taxes are "dependent on the government." Most of them are working people who simply do not earn very much money.
Romney also assumed that all of those in the 47 percent who pay no federal income tax vote Democratic. But polling data suggest that's just not true. President Obama is faring better than Romney among the lowest earners -- those most likely to be among the 47 percent who pay no federal income tax -- but polls show Romney is supported by some 40 percent of those earning the lowest income. In fact, a healthy chunk of the 47 percent are seniors who tend to vote Republican.
Romney's answer to a question, recorded surreptitiously during a Republican fundraiser in May and reported Sept. 17 by Mother Jones, has touched off a firestorm of analysis.
There are plenty of opinions on Romney's answer, and there is certainly room for reasoned debate about the growth of entitlement programs and the effect on the budget. Whether those who pay no federal income tax are people 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" is a matter of opinion. But Romney is wrong to say that all of those in that 47 percent are "dependent upon government."
Romney is a bit out of date with his claim that 47 percent of Americans pay no federal income tax. That was true in 2009, but the number is lower now, and falling as the economy improves and more people are working and getting paychecks.
Figures come from the nonpartisan Tax Policy Center, and its most recent analysis in July 2011 put the figure for that year at 46.4 percent. That comes to about 76 million individuals or families who paid no federal income taxes in 2011. TPC projected that the percentage would fall to 46 percent this year, and to 44 percent in 2013, under current tax policies.
Let's take a closer look at the 46.4 percenters.
According to the Tax Policy Center, about half of those who owe no federal income tax are people whose incomes are so low that when standard income tax provisions -- personal exemptions for taxpayers and dependents and the standard deduction -- are factored in, that simply leaves no income to be taxed. Those are people who earned less than about $27,000.
But that doesn't mean those folks paid no taxes at all. Many of them paid payroll taxes, those taxes taken out of a paycheck by an employer to fund programs such as Social Security and Medicare. They also pay federal excise taxes, such as those on gasoline, and they may also pay state and local income taxes or property taxes.
So that's half of Romney's 46.4 percenters. The rest pay no federal income tax due to tax benefits and credits. Here's the rest of the breakdown:
---22 percent receive senior tax benefits -- the extra standard deduction for seniors, the exclusion of a portion of Social Security benefits, and the credit for seniors. Most of them are older people on Social Security whose adjusted gross income is less than $25,000.
---15.2 percent receive tax credits for children and the working poor. That includes the child tax credit and the earned income tax credit. The child tax credit was enacted under Democratic President Bill Clinton, but it doubled under Republican President George W. Bush. The earned income tax credit was enacted under Republican President Gerald Ford, and was expanded under presidents of both parties. Republican President Ronald Reagan once praised it as "one of the best antipoverty programs this country's ever seen." As a result of various tax expenditures, about two thirds of households with children making between $40,000 and $50,000 owed no federal income taxes.
The rest ended up owing no federal income tax due to various tax expenditures such as education credits, itemized deductions or reduced rates on capital gains and dividends. Most of this group are in the middle to upper income brackets. In fact, the TPC estimates there are about 7,000 families and individuals who earn $1 million a year or more and still pay no federal income tax.
So when Romney says all of those in the 46 percent are "dependent on government," that's not accurate. Of the estimated 76 million who paid no federal income tax in 2011, 61 percent earned anywhere between $10,000 and $50,000.
But it is true that 42 percent of the 76 million who owe no federal income tax had a "negative liability" in 2011, meaning that in addition to not owing any federal tax, they got a check from the federal government due to eligibility of some form of tax expenditure. But the majority did not.
Eric Toder, co-director of the Tax Policy Center, cautions that the TPC report was a one-year snapshot in a particularly difficult economic year. The number of people who owed no federal income tax was unusually high in 2011, which was still a recession year, he said. Some of the temporary tax credits enacted by Obama in reaction to the economic crisis will soon go away, and the numbers should drop in coming years, Toder said.