It began as a retort and became a fear. For years, when liberals would accuse conservatives of cutting taxes for the rich, our main argument was that low marginal tax rates on high earners were good for the economy. But we would also respond that rich people actually pay a large share of all income taxes. Over time, many conservatives grew convinced that the true fairness issue raised by the tax code is that this share is too large — and, even more, grew alarmed by how many people were not paying income taxes.
That 47 percent of all tax filers have no income-tax liability is now one of the most widely known statistics on the right. (Actually, according to the Tax Policy Center, the figure was 47 percent in 2009 and will be 46 percent for this tax year, but 47 is the number that has lingered in the public debate.) Economist Michael Boskin, a veteran of Republican administrations, fretted in a recent Wall Street Journal op-ed that tax policy “can create a majority paying nothing and voting more spending at the expense of a taxpaying minority.” When he announced his presidential campaign, Texas governor Rick Perry said, “We’re dismayed at the injustice that nearly half of all Americans don’t even pay any income tax.” Michele Bachmann, also running for the Republican nomination, says she will reform taxes so that everyone pays some amount in income taxes.
...The good news is that these fears are overblown. The 47 percent figure does not mean we are near a tipping point. Most of the people included in that figure do make financial contributions to the federal government, and there is no reason to think that nonpayment of income taxes is turning millions of Americans liberal. The bad news is that worrying too much about this number will lead conservatives down an intellectual and political dead end.
...It matters how we treat payroll taxes because, while fewer people pay income tax than did so in the Seventies, the burden of the payroll tax has gotten heavier. Count both the payroll and income tax and there is no trend toward lighter federal taxes on the lower-middle class. The Tax Policy Center has estimated tax rates over time for families of four who make half the median income. People at that income level in 1955 paid 2 percent of their income to the federal government and faced a 2 percent marginal tax rate on their next dollar earned. People at that income level in 2005 paid the federal government 4.2 percent of their income and faced a marginal rate of 38.7 percent.For the rest of the article, click here.