Thursday, September 27, 2012

Bush Tax Cuts Helped Create "The 47%" - Business Insider

Ever since Mitt Romney famously dissed nearly half of the country, "the 47%" has become as much a part of the American lexicon as "the 1%."

Romney, you will recall, said that he will never be able to convince these non-federal-income-taxpaying people to vote for him because they refuse to take responsibility for their lives and therefore need Obama government handouts.

Romney has justifiably been raked over the coals for this remark.

Because, in addition to being insulting, it's factually moronic.

Most of "the 47%" have jobs and pay payroll taxes. Of those who don't pay taxes, many are elderly. And, of course, many of those who don't pay federal income taxes are Republicans and therefore are (or would be) Romney voters.

And that's the point that hasn't been emphasized enough.

We haven't arrived overnight at the situation in which 47% of Americans don't pay federal income tax.

As this chart from the Heritage Foundation shows, back in the 1960s, 1970s, and 1980s, the number usually vacillated between 15% and 25%.

Then it started to climb.

And, thanks to several changes in the tax code, combined with increasing income inequality (the vast majority of the gains in national income went to the richest Americans), it kept climbing--right through Republican administrations, and a Democratic administration, and a Republican administration.

One of the biggest jumps in the non-federal-income-taxpayer rate, in fact, came during the second Bush administration, when George W. Bush implemented two rounds of tax cuts. As the Heritage chart shows, these tax cuts helped spike the non-taxpayers from about 35% of Americans to nearly 50%.

And the rate has actually fallen since the first year of the Obama administration.

None of this is to suggest that it wouldn't be a good idea to broaden the tax base. It would. People care more about systems that they participate in, so paying something would help more Americans feel ownership of the federal government and its policies. It would also lessen the perception that there are two Americas--the "makers" and the "takers." (The divisiveness that this distinction creates hurts the country.)

But if the goal is to "broaden the tax base," there's an easy starter fix: Repeal the Bush tax cuts. Because those cuts led to a huge increase in the number of non-federal-taxpayers, accelerating a trend that had already taken hold during the administrations and tax-code changes of the prior fifteen years.

Source: http://www.businessinsider.com/bush-tax-cuts-helped-create-the-47-2012-9

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