Percent Paying No Income Tax Time SeriesI'm tired of the all the discussion about Mitt Romney's 47% remarks. But I want to say one (hopefully) last thing about it. Earlier this week, Ezra Klein published the graph on the left (click on it to see it at regular size). I know that I've been talking about Klein a lot recently, but as I said, he's been really insightful.

What this graph shows is that the percentage of people who paid no federal income taxes was roughly 20% through the mid-1980s. There are three big reasons why it has gone up: Reagan, Bush Jr, and the Lesser Depression. There isn't much to say about the Lesser Depression; when economic times are bad, there are more poor people who will not pay any federal income taxes. We see this in the 1970s, when the recession brought the number up and then in the 1980s, the recovery brought the number back down.[1]

What Reagan and Bush Jr did is very interesting. They both wanted to pass tax cuts that were highly regressive: giving the rich far more benefit than the poor. This is an article of faith on the right. About the only thing we absolutely know about a Romney administration is that it would lower taxes on the rich. But there's a problem with this idea. You can't get the 90% of the country who would get nothing from a tax cut to support such a proposal. So Reagan and Bush Jr offered minor tax cuts for the poor and middle class. One of the results of these cuts was to increase the percentage of people who paid no federal income tax.

This is just history and one can agree or disagree that these tax cuts were a good idea. But there is an outrage that has been going on for a while—Fox News has been pushing this idea that it is somehow wrong that almost half of the people don't pay any federal income tax. (They often make matters worse by claiming that these people pay "no taxes" full stop.) Other conservative media outlets have done the same thing. And many Republican politicians have followed suit.

Here's the outrage: the same people complaining about the poor not paying federal income taxes are the same people who created this situation to push through tax cuts for the rich! The Republicans are abusing the poor on both sides of this issue. First, they give the poor tiny tax cuts to justify enormous tax cuts for the rich. Once that's done, they claim that the poor don't pay enough in taxes.

There is more to this, of course. The Republicans who claim to always be for tax cuts are half-in for raising taxes on the poor. I say "half-in" because there are a lot of conservatives who see the trap here. (I don't think they actually care about taxing the poor.) This is not real hypocrisy, however. The Republicans are clearly only interested in tax cuts for the wealthy. We saw this in the payroll tax fight earlier this year. But their rhetoric is always that taxes are bad for everyone. So they certainly seem to be hypocrites on this subject.

If we let them, the Republicans will raise taxes on the poor to a higher rate than it was in the early 80s when this madness started. But apparently, now is not the time. Romney is back tracking as fast as he can. But don't think the issue will be dead for long. The poor are too convenient a punching bag for Republicans. You know how bullies love to pick on the weak.



[1] President Carter gets a bunch of blame for the late 70s recession while President Reagan gets a bunch of credit for "Morning in America." This is wrong. Both the recession and the recovery were due to Fed Chairman Paul Volcker. In order to reduce inflation, he raised interest rates in the 1970s. This pretty much guaranteed that Carter would be a one term president. Once inflation was under control, he lowered interest rates and the economy took off. This pretty much guaranteed that Reagan would be a two term president. See the Wikipedia Stagflation article for more information.