The Other Comments of 47% You Didn’t Hear… Tax Bracket of 94%??

by Elliott Stonecipher

It was three weeks ago when the from-the-left opinion mag, Mother Jones, broke the news of the “secret tape” of Republican presidential candidate Mitt Romney commenting on the “47% of Americans … who believe they are victims.”  Here is the headline comment, as Romney delivered it to his private, he surprisingly believed, audience:

“There are 47 percent of the people who will vote for the president no matter what. All right, there are 47 percent who are with him, who are dependent upon government, 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 — that that’s an entitlement.”

From the moment the video hit the internet, the campaign of President Obama has led the political left’s onslaught as it accuses Romney of the worst kind of class warfare, something about which the Obama campaign and the rest of the political left wrote the book.  In the past day or so, Romney has eaten this particular crow right down to its beak and claws, explaining that he was “completely wrong” in his remarks.  (We might hope to now hear President’s Obama’s like mea culpa for his deliberate and knowing whoppers about Romney’s “$5 trillion tax cut” plan.)

As is virtually always the case anymore in American politics, the facts related to this kerfuffle have been completely lost in the hyperspin and rank and toxic hypocrisy.  To say Romney’s remarks hit an American – not only Republican or Democrat – nerve grossly understates the case.  As our political left prays at the alter of nurturing government dependence, our political right believes such nurturance is quite literally killing the America they love, and may only fondly remember.

Just a Few of the Interesting and Important Related Facts

If one cares to dig into the data underlying this political fire-fight, go to its source, a key report from the Tax Policy Center.  Along with its specific report on this topic, the TPC gathers and publishes a treasure trove of related information for any who are interested.  Cumulatively, the data reveal that neither major political party is any more or less responsible, or  irresponsible, in what they have done in this context.

Yes, the data clearly show that 46.4% of American households paid no federal income tax in 2011, so it’s likely that by this point in 2012, that percentage makes it to, or past, Romney’s “47%” threshold.  In fact, though, nearly two-thirds of those paying no federal income tax do pay payroll (Social Security and Medicare) taxes, and others pay state income taxes, property taxes, sales taxes, etc.  Almost 13% of the 46.4% who paid no 2011 federal income tax are solidly middle-class, with incomes between $33,542 and $59,486, and, much to the glee of Democrats, the TPC also found 105,000 households with incomes above $211,000 who also paid no federal income tax last year (many of whom, I would bet, are Democrats).

Missing the Point, on Purpose?

It takes very little time for a truly interested reader to see just how misleading this so-called “debate” is.  The fact buried in all the nauseating posturing from both sides is that our presidents and Congress, fed a steady diet of steak by a few thousand ultra-rich lobbyists, have made a total mess of our tax code.  Very few DC insiders don’t understand what this nutty and dangerous imbalance of taxpaying is really about:  the skyrocketing rate of increase of those paying no federal income tax.

Since 1950, the percentage of American households paying no federal income tax has ranged between 16.0% and today’s near-47%.  That 16.0% low was in 1969.  Richard Nixon was president, the Vietnam War was raging, civil disobedience ruled the day, and 84% of American households had their very own skin in the game of our nation’s life and times, paying their federal income tax right along with their house note or rent, groceries, medical bills and all the rest.

Today, of course, is the peak in the annual percentage who do not pay federal income tax.  That 46.4% incidence is 190% higher than in 1969.  It took 34 years for the non-payment percentage to double, 31.8% in 2003, and it is only 10% shy of doubling yet again, in a mere 8 years.  In the 2001-2008 presidency of George W. Bush, the percentage grew from 27.2% to 36.3%, and between 2008-2011, the percentage has grown to 46.4%.  Put another way, the incidence of households not paying federal income taxes grew 34% in President Bush’s 8 years in office, and another 28% in the first 3 years of President Obama’s.

It seems clear that just as the “Bush tax cuts” lowered federal income taxes for everyone, so did it depend for political support on expansions of credits like the Child Tax Credit and Earned Income Tax Credit.  (Louisiana, by the way, has the second-highest incidence of federal tax returns with the Earned Income Tax Credit, 28.1%.  Mississippi has the highest incidence, 33.1%.)  Likewise certain is that the most recent jumps are a reflection of the Great Recession’s still-continuing absence of a real and strong economic recovery.  While the 28.0% jump in the incidence of non-payment of federal income taxes between 2008 and 2011 is huge, so was the 26% increase between 2000 and 2003.

High Income Tax Rates? … Most of Us Haven’t Seen High Rates!

Just to keep the subject of income tax rates in context, I came across a very interesting statistic during this work.  In 1944 and 1945, the last two years of World War II while Franklin Roosevelt and Harry Truman were in office, the highest income tax bracket was 94.0%.  All taxable income above $200,000 was thus almost totally surrendered to the American Tax Man (Woman?), and my handy-dandy converter for such calculations says $200,000 in 1944-1945 is equivalent to just under $2,600,000 today.  Our top bracket remained as high as 91% (on taxable income over $400,000) in 1963, and was still 50% (on taxable income over $175,250) as recently as 1986.  That bracket has remained between 28.0% and 39.6% since, applied to varying amounts of taxable income.  (My experience in starting and running my own business over 30 years ago concludes that lower tax rates on small business owners produce more jobs.)

When the heavy and noxious partisan smoke clears a bit, America – by hook or by crook – will be required to straighten out the decades of tax policy abuses and imbalances our partisan, lobbyist-pervaded world has logically produced.  In the meantime, both sides have plenty of fodder to use against each other in any debate about tax policy, but as they do, the non-partisan should discount almost all of it in favor of their own homework.

Government, after all, best knows how to spend our money, not to get by with less, or even spend it wisely.

Elliott Stonecipher

Elliott Stonecipher’s reports, essays and commentaries are written strictly in the public interest.  No compensation of any kind has been solicited or accepted for this work.  This work is protected, and no other use of it is permitted without the written consent of Mr. Stonecipher.