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Mon Aug 22, 2011 at 07:21 PM PDT
Breaking Down the 'Half Pay No Taxes' Myth
by whereisboblafollette
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I woke Saturday to Tara the Antisocial Social Worker's rant of the fantastically righteous variety. I love this stuff. Giving context to the claims of the Republicans and conservatives is vitally important. As is pointing out the dishonesty in the way this talking point is framed.
At the very moment I found Tara's diary, the Front Page had Laura's piece about the Heritage Foundation misusing statistics in their claim about how great life is when you live in poverty.
And it occurred to me...this '50 percent' thing has never passed my smell test. Could conservatives and Republicans be repeating a false reading of a statistic and the zombie media uncritically repeating the falsehood? Do baby's make poopy diapers? Yes, of course the claim is factually deficient at best and more likely a deliberate misrepresentation, and of course the zombie media is not taking a critical look.
The problem with both lines of defense that we tend to make in this argument is they both accept what Republicans and conservatives say as having a modicum of truth. What's good about both is they try to lend some context, but they don't give the complete context or put numbers to that context.
Please follow along as I blow up that '50 percent' myth, smack down the media while doing their jobs for them, and put some numbers to the points Tara was making.
The cliff notes version:
Even in the worst year of 'people not paying taxes,' approximately 40 percent of households don't pay federal income taxes, far short of the 50 percent claim.
In normal years, it breaks down something like this:
53.6 percent do pay taxes
23.3 percent are either young people or destitute people
10.2 percent are the elderly
4.5 percent receive tax breaks that benefit the wealthy more than the poor and middle class
8.4 percent are (for the most part) working class people and people with kids that are trying to improve their lot in life.
Fifty Percent of What?
This talking point is always stated in one of two ways. Either the way John Cornyn phrased it on the Senate floor
the fact (is) that according to the Committee on Joint Taxation, 51 percent -- that is, a majority of American households -- paid no income tax in 2009.
or the way Rick Warren phrased in his tweet
HALF of America pays NO taxes.
Half of All Households?
So let's look at Cornyn's claim first. What do you think when you hear the term "households?" Chances are you think of something similar to how the U.S. Census (at page 104) defines "Household"
A household consists of all the persons who occupy a house, an apartment, or other group of rooms, or a room, which constitutes a housing unit. A group of rooms or a single room is regarded as a housing unit when it is occupied as separate living quarters; that is, when the occupants do not live and eat with any other person in the structure, and when there is direct access from the outside or through a common hall. The count of households excludes persons living in group quarters, such as rooming houses, military barracks, and institutions. Inmates of institutions (mental hospitals, rest homes, correctional institutions, etc.) are not included in the survey.
In other words, a single person, couple, or group of people (extended/unextended; married/unmarried) living in a defined housing unit. How many households are there in the United States in 2009? About 117.5 million. That seems to make sense, right? About 2.6 people per household times 117.5 million equals 305.5 million, about what the U.S. population actually was in 2009.
And what does it conjure in your mind when someone says 'half of all households don't pay federal income taxes?' I'm willing to speculate that most people think half of the houses and apartments in the country are occupied by a single person, couple, or group of people pay no federal income taxes between them. Wrong. Not even close.
Nobody who studies this issue measures how many "households" do or do not pay taxes. What they measure is whether a "taxing unit" does or does not pay taxes. For instance, Cornyn was basing his statement on a Letter to Congress from the Joint Committee on Taxation. They estimated that there were 164.4 million "taxing units" in the United States. Admittedly the entities who compile this data are often guilty themselves of conflating 'households' with 'taxing units.'
So, how does the Joint Committee on taxation define a "taxing unit" when there were only 140.5 million individual tax returns filed in 2009. Presumably they combine the number of individual tax returns with the number of individual tax returns they think should have or could have been filed. (The fact that this entire conservative/media meme rests on a single Letter to Congress that is completely based on estimates and the background information upon which said Letter is based is not released to the media or public is an entirely different rant, but something you should be aware of).
Now I'm going to ask you to assume something, but it's a pretty safe assumption. I'm going to ask you to presume that the vast majority of "taxing units" that had a positive tax liability in 2009 occupied a household that contained no other taxing units that paid federal income taxes.
Sure, there's probably a good chunk of Singles and Heads of Households who pay federal income taxes who live together, but the vast majority of Married (Joint and Separate filers) occupy separate housing units. So let's try to figure out how many filers who paid income taxes occupy houses without other filers who owed taxes.
Number who paid fed inc taxes x estimated percentage living without other people who paid fed inc taxes = approximate number of households with at least one tax payer.
Single - 37.8 x 85% = 32.1 million households with a tax payer
Head of household - 5.3 million x 85% = 4.5 million households with a tax payer
Married - 37.1 million x 95% = 35.2 million households with a tax payer
Add them up and you get approximately 71.8 million households with at least one person who paid federal income taxes. Divide by total number of households - 71.8 million / 117.5 million = 61% of all households have at least one taxpayer with positive federal income tax liability. 39% do not, and I request you to remember that number.
So let's look at this in reverse. Half of 117.5 million households is 58.8 million households. 80.2 million "tax units" paid federal income taxes. So in order for half of all households to pay no federal income tax, 21.4 million "taxing units" must live with other "taxing units" that also pay federal income taxes. Seem absurd? That's because the claim that half of all households pay no federal income taxes is absurd. And the media should find the claim facially absurd as well, but they don't bother looking into it, much less recognize the absurdity.
Here's the problem...a large portion of "tax units" live with other "tax units" and it's a pretty safe assumption that most of those combinations are not "tax units" that pay federal income taxes living with other "tax units" that pay federal income taxes. Thirty percent of all "taxing units" that have enough income to result in a positive federal income tax liability live with other "taxing units" that also have enough income to have a positive federal income tax liability? I don't think so.
Slacker 22 year old pulling bong hits and playing X-box all day living in the basement of his parents suburban home - one "household," two "taxing units."
Elderly grandma and her spinster sister sharing a condo - one "household," two "taxing units."
Four Masters students sharing a flat - one "household," four "taxing units."
Family with live in grandma who also takes in brother-in-law who lost his job due to bad economy - one "household," three "taxing units."
We can see how this plays out when looking a bit at the other entity that studies the topic of 'who doesn't pay federal income taxes,' the Tax Policy Center. For instance, in a 2009 estimate the Tax Policy Center found approximately 46.9 of all 'tax units" would not pay any federal income tax, but when we look at "nondependent tax units" (presumably meaning those tax units that can't be claimed as a dependent by another tax unit) that figure dropped to 38 percent. Remember my presumption of percentages of "tax units" that pay federal income taxes having distinct households? Pretty much jibes.
Our atrocious media, and we ourselves, have let this abuse of the data to continue without even questioning it's validity. It conjures a picture of the distribution of the American tax burden that simply does not reflect reality.
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