Mitt Romney famously came under fire during his 2012 presidential campaign after leaked audio caught him saying that 47 percent of the American public are “dependent on government,” “believe that they are victims” and “believe the government has a responsibility to care for them.”Romney also claimed that the 47 percent of Americans who don’t pay federal income taxes are strong Obama supporters because they’re so dependent on government benefits that Obama provided.
The “47 percent” figure that Romney cited was actually the percent of Americans paying no income tax, not those receiving benefits. Plenty of critics were quick to point out that, among the 47 percent, are retirees on social security receiving un-taxed benefits, and that many of the “47 percent” who are working presumably pay payroll tax, among other state and local taxes.
Okay, they have a point; not all of the 47 percent are paying “no taxes,” and just because they aren’t paying income tax doesn’t necessarily mean they’re “dependent on government.”
So, instead of looking at the percentage of Americans paying no income tax, a more useful number would be the number of Americans who receive more in government benefits than they pay in taxes.
Unfortunately, when examining this question, we get a number far worse than Romney’s “47 percent.”
According to the Tax Foundation, they first examined this question in 1967, then again in 2007, and most recently 2009.
As can be seen in the charts below, the results for 2009 are quite shocking. Basically, we find that the first three quintiles (including the “middle-class”) all received more in transfer income than they paid in all federal taxes, while the fourth quintile was virtually at parity. Only the top quintile paid substantially far more in total taxes than they got back in transfer income.
On the tax side, we can clearly see the results of refundable tax credits – such as the EITC and the child credit – combined with “stimulus” measures such as the Making Work Pay Credit. For the lowest quintile, these refundable measures reduced their total federal tax bill to a mere $200. By contrast, their transfer income was $8,500. This means, they received $42.50 in transfers for every dollar they paid in taxes.
However, the total tax federal tax burden for households in the middle quintile was less than half of what they received in transfer income. In other words, these middle-income households received $2.14 in transfers for every dollar they paid in federal taxes.
It is quite surprising to see that even households in the fourth quintile are essentially getting as much back in transfer income as they pay in taxes. Were we to include the value of other federal spending, it’s clear that these households are net beneficiaries of government. (No doubt this somewhat reflects the fact that taxes cover only 60 cents of every dollar the government spends).Charted below is the ratio of benefits received by taxes paid by income quintile, starting with those earnings $15,000 or less a year (who receive $42.50 back for every tax dollar they pay), to those earning over $212,800 a year, who get back 21 cents on their dollar.
Is there anything to say, other than “yikes”?