By M.D. Kittle | Wisconsin Reporter
MADISON – Maybe Mitt Romney’s comments about the 47 percent didn’t sit well with his opponents and the broader media, but the GOP presidential candidate isn’t working with fuzzy math.
In fact, Romney’s secretly taped pronouncement is arguably one of the truest statements made in an election year campaign trail riddled with lies and spin.
“These are people who pay no income tax,” Romney said.
He may be painted as right-wing, but the man once viewed as a moderate Massachusetts governor is right.
According to the conservative-leaning Tax Foundation, about 42 percent of U.S. taxpayers do not pay income tax. Tack on the about 5 percent of Americans who do not report enough income to have to file with the IRS, and Romney’s numbers are spot on.
In Wisconsin, 32 percent of taxpayers didn’t pay income tax in 2009, the latest data available, according to the Tax Foundation.
The vast majority of the “47 percent” club is composed of low-income earners, around 94 percent of households making $50,000 or less, said William McBride, chief economist at the Tax Foundation.
McBride said the percentage of nonpayers has more than doubled since the early 1990s, thanks to the explosion of the Earned Income Tax Credit and the Child and Dependent Care tax credit. Each initiative has garnered bipartisan support, adding about $240 billion annually to the federal budget, McBride said.
“(President) Clinton expanded the Earned Income Tax Credit, (President George W.) Bush the child-care credit, and (President) Obama expanded both in the 2009 stimulus and the Making Work Pay credit,” he said.
In EITC, the government cuts a check to low-income earners who pay no income tax, and the child-care tax credit greatly buys down the tax liability of tens of millions of Americans.
McBride says it’s time for a change in how the government spends.
“We need to address spending through the tax code. We need to switch over to the social side of the ledger if we’re going to engage in these social policies,” he said of payments to low-income nonpayers.
Bob Jones works with the organizations that serve low-income populations in Wisconsin. He is executive director of Wisconsin Community Action Program Association, a trade group for the state’s 16 Community Action Agencies, which served some 337,000 people last year.
Jones said income tax is but one tax of the many – payroll, sales, property – that the so-called nonpayers every day.
“The difference between this tax or that tax is irrelevant for someone who is living in poverty,” Jones said.
But there is a bottom line for Americans caught in the middle, feeling like they are shouldering more of the tax burden for programs and services.
Jones agrees, but until the American economy and its stakeholders can find a way to pay people enough to keep them out of poverty, he said the nation must keep its social “compact” with the poor.
“You should work, but if you work 40 hours a week, nobody should be in poverty because of that,” Jones said.
Despite Romney’s rhetoric about the 47 percent, the category of people who don’t pay income taxes isn’t a simplistic fit.
The presidential candidate said the group is replete with people who are “dependent upon the government, who believe they are victims, who believe the government has a responsibility to care for them, who believe they are entitled to health care, to food, to housing.”
“(M)y job is not to worry about those people. I’ll never convince them they should take personal responsibility and care for their lives,” Romney added.
But while many of those 47 percenters are part of the so-called 99 percent, some in the club squarely belong with the 1 percenters, the wealthiest Americans as played out by the Occupy Movement.
There are millionaires who pay no income taxes because of myriad tax credits and deductions.
U.S. tax code includes more than $1 trillion worth of tax credits and deductions for all comers.
It’s this muddled mess of a tax code that the Wisconsin Taxpayers Alliance says is screaming out for reform.
The nonprofit tax education organization in Madison in a report noted that state income tax law the past 15 years has resembled composting.
“Unthinkingly, elected officials have heaped tax credit on top of exclusion, producing an undefinable pile of complex forms, conflicting policies, and unintended consequences,” the report stated.
A legislative committee is looking into reforming the state tax code.
“What a mess our state income tax is,” said Dale Knapp, research director of the Taxpayers Alliance. “At the federal level, it’s the same thing. State and federal tax code has become this behemoth loaded up with credits and deductions. In the end, you get what have now, where roughly half of the filers pay little or no income tax.”
The question, tax trackers ask, is whether politicians will have the will to address the myriad of tax credits that benefit so many voters.
Contact Kittle at email@example.com