Why Half of Americans Don’t Pay Federal Income Tax

Alden Wicker

The political news cycle exploded this week when Republican presidential candidate Romney was caught, in a secretly-taped fundraising event, telling wealthy potential donors what he thought about the tax system.

“There are 47% of the people who will vote for the president no matter what,” Mr. Romney said. “There are 47% 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. And the government should give it to them. And they will vote for this president no matter what. These are people who pay no income tax. My job is is not to worry about those people. I’ll never convince them they should take personal responsibility and care for their lives.”

Whoa, what a scandal!

Or not, depending on who you ask. Romney’s statement has morphed into a sort of Rorschach test for how you think about the tax system. Are entitlements out of control? Are lazy Americans truly sucking the system dry? Or is this just a sign of hard economic times and the result of Bush-era tax cuts?

With all the facts that are being bandied about in the media, we’ve decided to give you the economic and policy background behind them, and then let you decide what you think of his remarks. We’ll cover Romney’s assumptions in his speech, plus responses by liberal pundits.

Seriously, after reading this article, you are going to be so ready to debate that insufferable friend of yours who’s on the opposite side of the political spectrum.

Before we get started, we should warn you: The federal tax system is extremely complicated (you know this). In order to break down how it has led to 47% of households paying no federal income taxes, we’ll have to use some terms that you have no reason to be familiar with outside of tax time during April. So we’ve created definitions that will pop up when you mouse over the underlined words and link to articles explaining these terms further that you can explore if you are confused or would like to know more. For a basic explanation of how taxes work, you can read this short article.

Before we begin, let’s be clear about what Romney was talking about: federal income taxes. These are taxes levied by the federal government on whatever income you make, including your salary, income from investments, freelance income, income from your business and many other types of income.

OK, let’s dive into the facts:

“There are 47% of the people who will vote for the president no matter what … These are people who pay no income tax.”

QUESTION: Is this true?

ANSWER: Yes, 47% of Americans pay no federal income tax.

Romney was accurate: 47% of Americans don’t pay federal income tax. These households who don’t pay federal taxes aren’t off the tax rolls because they are running from the IRS or taking advantage of the system. The tax system is just set up this way, and they are doing what any taxpayer–including you–would do. They are taxed on a certain percentage of their income, but they receive a combination of deductionsDeductions subtract from your taxable income. That means for each deduction, the amount of income you’re taxed on goes down, meaning you pay a little bit less in taxes. , creditsCredits reduce the amount of taxes you owe. So if you receive a $1,000 credit, that means you will pay $1,000 less in taxes.  and exemptionsExemptions reduce the amount of income you will be taxed on. For each exemption you took for 2011, you could deduct $3,700 from your gross income to arrive at your taxable income. So if you fell in the 10% tax bracket, that translated to $370 less in taxes. You are allowed to take an exemption for yourself (“personal” exemption), your spouse and each dependent. that bring their tax bill down to $0. In fact, they don’t even need an accountant to figure that out, they just need to follow the steps on the basic 1040 form in April.

Q.: Are these people paying any taxes?

A.: Yes, the vast majority are.

Two-thirds of households who don’t pay federal income tax, pay other taxes, such as payroll taxes–which are what get taken out of your paycheck for Social Security and Medicare. And Americans also pay federal taxes on alcohol, gas and cigarettes. Overall, just 10% of households pay no net federal taxes. And then there are state and local taxes that we pay, too. In order to not pay any taxes at all, you would have to completely opt out of our economic system (like Freegans)–otherwise, you’re paying sales tax on your purchases at least.

Q.: Who are they?

ANSWER 1: Four out of five households who pay no federal income tax earn less than $30,000.

One of the biggest reasons households don’t pay federal income tax is because of limits on taxes for low-income earners. After these households take the standard deductionMost people take the standard deduction on their returns, which is worth anywhere from $5,800 to $11,600. This means if they make $20,000 and take the standard deduction, they could pay taxes on only $14,200 in income., plus personal exemptions for themselves and their dependentsLoosely defined, a dependent is a child or family member who doesn’t have significant income of their own and relies on you for shelter and other living expenses.–which all subtract from their tax bill–they end up not owing anything.

ANSWER 2: 44% of households paying no federal income tax are the elderly.

Many of those not paying federal income taxes are receiving Medicare and Social Security benefits, and depending on their income, retired households pay a lower tax rate on Social Security benefits and don’t pay taxes for the value of Medicare. In addition, people over 65 get a larger standard deduction, and a credit for the elderly depending on their income. The elderly also often have high medical expenses, which can be deducted. (By the way, in polls, Romney looks to grab 53% of the elderly vote, while Obama currently has anywhere from 38 to 45% of the elderly vote.)

ANSWER 3: And about 7,000 of the households paying no federal income tax include millionaires.

Not everyone not paying income taxes is the low-income or the elderly. The very wealthy make up a small percentage of this group as well. There are essentially three reasons why someone who has a high net worth could pay zero in taxes. They a) could have engaged in creative accounting, which usually requires an accountant on retainer, complicated assets and perhaps an off-shore bank account, b) could have taken advantage of lower tax rates on investment income, c) could have suffered a huge financial misfortune (illness or catastrophic damage to their home, both things that could happen to anyone) which allowed them to deduct large amounts from their tax liability or d) it could be some combination of these factors. Since we don’t have a breakdown of the reasons why these millionaires didn’t pay, we can’t assume they are or aren’t playing the system. This one, for now, is a black box.

“There are 47% 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. And the government should give it to them.”

Q.: Are the rich supporting tax breaks for lower-income households?

A.: Tax breaks actually benefit high-income individuals more than low-income individuals.

High-income tax payers receive a higher percentage of their income–and a higher amount of money overall–in tax breaks. There are several reasons for this. High-income individuals are more likely to be covered by insurance and pension plans through their employers, to which contributions are tax-free. The lower tax rates on investment income disproportionately benefit the top 1% of earners. Higher-income tax payers receive more gains from itemizing their deductions, while lower-income earners just take the standard deduction. And lower-income taxpayers rarely take advantage of middle class-centric deductions for student loans, higher education expenses and self-employed medical insurance premiums.

This is partly due to the fact that some of Bush’s tax cuts in 2001 and 2003 were mostly beneficial only for the wealthy (and middle class, as we’ll explain below). Bush’s tax cuts lowered capital gains taxes (taxes on the income you earn from investments) and the tax rate on dividend income (which also comes from investments). They also eliminated the estate tax (which affects those who leave assets to their children) and the provision that would keep high-income taxpayers from taking personal exemptions and itemized deductions.

“And they will vote for this president no matter what.”

Q.: Are people not paying federal income tax and relying on government benefits leaning toward voting for Obama?

A.: Not always.

Out of the ten states with the highest proportion of non-federal-income-tax-paying households, eight are Republican states. This statistic–which has been cited across the blogosphere, complete with this handy red/blue state map–can be rather misleading, as it implies non-payers are more likely to vote Republican, which isn’t always the case. Low-income earners are more likely to vote Democratic, even in states that went Republican in the last presidential election. In the 2008 election, 75% of voters earning less than $15,000 voted for Obama, and 63% of those earning $15,000 to 30,000 did. On the other hand, the elderly, who as we pointed out earlier are some of the people not paying federal tax, leaned Republican: 53% voted for McCain.

Another way to look at this red-state-blue-state phenomenon is through the lens of government spending. In his speech, Romney lumped people who don’t pay federal income tax in with people who depend on government benefits, but they are not always one and the same. As we stated above, most households not paying income tax are low-income or elderly citizens. These two groups do benefit from government spending (hello Medicare and food stamps) but they aren’t the only ones. In 2007, the bottom fifth of households by wealth only used 36% of government benefits. The rest mostly went to middle-class families. In fact, states where the federal government spends more on entitlement programs, like unemployment and subsidized school lunches, than they collect in taxes are actually more likely to lean Republican. The IRS is taxing people living in these states at the same rate as the rest of the country, but the government is doling out more benefits.

Q.: Who is most recently responsible for these people not paying federal income tax?

ANSWER 1: 7.8 million families stopped paying federal income tax because of Bush tax cuts.

Romney seemed to imply that Democrat-enacted programs were responsible for people not paying federal income tax. But Bush’s tax cuts in 2001 and 2003 enacted a few provisions that were responsible for pushing some families out of the tax rolls completely. They lowered federal income tax rates for everyone and doubled the child tax credit from $500 to $1,000 per child. In this example, a married couple with two children earning $40,000 in income would have paid about $2,158 in 2000. After the tax cuts in 2004, they would have taken a larger standard deduction, a larger personal exemption, and received a child tax credit that was twice as large, bringing their taxes to … $0. Most of the families that benefited from these tax cuts earn less than $50,000 a year (90%) and work full-time or part-time (91%). This amounted to about $1.5 trillion in tax cuts–$2.8 trillion if you include the extension of them under Obama.

ANSWER 2: And 95% of working families and individuals received tax cuts under Obama’s stimulus plan.

Obama was also responsible for ensuring that some people wouldn’t have to pay income tax. The tax cuts included in the stimulus included a refundable credit of up to $400 per working individual and $800 for working married couples and a temporary increase of the earned income tax credit (EITC) for low-income families. This amounts to $218 billion in tax cuts.

ANSWER 3: But the percentage of people not paying federal income tax has been rising since the 60s.

Reagan enacted policies that lowered lowered tax rates for everyone by double digits percentage points. In fact, you can see him discussing in this video how his policies would make it so that fewer low-income and disabled people would have to pay federal taxes. Overall, you can see the rising percentage of Americans not paying federal income taxes over the past fifty years in the chart to the right.

What Do You Think?

Now that we’ve laid out the facts, we know you have an opinion … or some more facts of your own to add. Is it OK that 47% of households don’t pay federal income tax? Or does this signal a deep-rooted economic problem in America? And if so, who’s fault is it? Tell us your thoughts in the comments.

  • christine

    Mitt is completely out of touch with working class America. I hope voters remember his demeaning comments in November.

    • Perplexed52

      It’s funny that there are only 2 responses to this well written and detailed article on a complicated topic – both of them “Go Obama” which tells me neither know responders understand what they are talking about. If Christine understood the comments, she’d have read that middle class got many of the tax benefits from the Reagan tax cuts.  Clearly she also has no idea what the “perceived” tax increases from Obama would do.  You can take the top 1% and take ALL of  their income and not make up the needed funds for this out of control government.   And Smdan 444 means, stand up for a better lifestyle paid by someone other than themselves!

      • guest

        Must be a con telling others what they think is wrong….

    • luckyhorseshoe

      Are his comments any more demeaning than the “cling to guns and religion” line from our current President? His words were demeaning citizens who merely choose to exercise their Constitutional rights. I think BOTH men would take back those comments but my point here is that which you find more insulting probably depends on your preconcieved opinion. 

    • mm

      You are out of your mind if you think the freeloader Obama or Barry Sotoero is in touch! He never worked a real day in his life. Leftist socialists payed his way through college! What has this guy ever accomplished other than handing out the taxpayers money to lazy Americans and the our enemies around the world. Research Obummer for about 20 minutes looking at what his values where in college and who his mentors where.  He’s certainly never had to rough it!

      • Julie G

        You are a paranoid, raging lunatic who doesn’t understand what an actual socialist or leftist looks like.  My retired mother who collects Social Security is not a “lazy American.”  People who work for poverty wages are not “lazy Americans.”

        • Rightfighter

           Julie~Do you eat with that mouth? Bleeding Liberals are the 1st to use their Pie Holes to Dis someone.
          A large percentage of that 47% are people (like that one saying “Obama got ALL of us a Phone” video last week on YouTube)…that’s what Romney’s talking about. WAKE UP and Smell REALITY!

          • thepixinator

            You just proved my point for me.  Keep on talkin’.

          • annoyed

            wow, you are a troll. 

  • Smdan444

    Once again, Mitt Romney’ and the Republican’ party believe that the American voter is stupid. Stand United America and vote for your right to a better lifestyle , ” Vote Obama “……

    • luckyhorseshoe

      nice bumper sticker. Care to support the sentiment? I KNOW that Obama’s policies have had a disastrous effect on my financial picture. I have no idea whether Romney’s business approach will do better but I KNOW that Obama has hurt me. When I invest in a company for the dividends their board of directors pay, I shouldnt have to worry about the President of the United States arbitrarily and, as far as I can tell, illegally dictating a one cent dividend per share. I am part of his beloved middle class but with that one move he cost me nearly $1000 per quarter. That is not political talking points or bumper sticker philosophy. That is a factual negative effect on my pocketbook. How do I invest in traditional income stocks like utilities when one day Biden says there is no such thing as “clean coal” and the next day Obama says he is not against clean coal? Every year we make decisions about our 401Ks or IRAs or MSAs that this administration puts at risk by their ignorance of business. What possible Constitutional basis is there for the President to convert debt to equity in violation of contract? To fire a corporate exec? To arbitrarily cut a company’s dividend rate? To tell us his healthcare charges are NOT taxes until his lawyers explain to him that it is only Constitutional if they ARE taxes.

      You think Romney thinks you are stupid? The President ran on eliminating earmarks. In his first month he presented a budget that did not cut a single earmark he ran against.  He says repeatedly he is cutting taxes for 95% of Americans. As Mr Romney points out, 47% dont even pay taxes!  Where is Bill Clinton complaining about THAT arithmetic?

      • Pamela Karaffa

        many people just do not understand how our government or how economics works; if feel sorry for those that think if we vote Obama that we are voting for a better lifestyle; ignorance is bliss.

      • Roundeye5

        So luckyhorseshoe, if you have all these investments you must be benefitting from the lower tax rate that those investments and the income they earn, are taxed at.  I don’t have any of those investments and find it difficult to have pitty for you. 
        Did you READ the article?  Your last paragraph seems to point that you feel the 47% is somehow taking something from you.  If you read about who they are and the taxes they do pay, it makes me wonder about your statement.
        In closing, your note is a continuation of the rhetoric that the right tends to sling… I don’t hear you anymore.

        • luckyhorseshoe

          Obviously your mind was closed from the beginning so no loss that you have now declared it closed. Pity? Whoever said I wanted PITY from you?? I merely chose not to engage in talking points and give real life examples. But of course you wouldnt see that. All you would see is that someone else has something you dont have so they are the enemy

          I started investing in dividend reinvestment plans in my twenties. I gave up lifestyle to invest over and above what employers offered. I did this whether I was making 25K or 140K. Dont hate on me because you werent smart enough to do the same. Blame yourself. My only issue is with being punished for doing the right thing.

          My last paragraph was all about the lies.Nowhere did I even come close to sour grapes as you did. That is all in your closed mind, not in my words. I have no problem with the folks who legally dont pay taxes. I never complained about that at all. What I DO care about is the lying and demagoguing of the class warfare on both sides.  What is it you think the 47% pay that Obama is cutting? He cant legally cut state or local income, real estate or sales taxes. He sure as hell isnt cutting soc security or medicare which are not really taxes but retirement planning. So what taxes do you think Obama is cutting on the 47% who pay no federal income taxes?  Is he cutting federal sin taxes on booze and tobacco? NO. Federal gasoline taxes? NO. So what are these taxes he is cutting for people who dont pay federal income taxes? The article says they pay other taxes. No disagreement. I just dont see Obama cutting those other taxes they pay. Do the 47% get to buy booze and butts without paying federal taxes on them? Not that I have heard.

          Try reading what I actually say instead of assuming you know what I am saying. And if you REALLY want to be taken seriously, instead of dismissing facts as right wing rhetoric, disprove it! Show me where I am wrong. I use facts and evidence and you dismiss it as looking for pity. But you dont even try to prove me wrong. 

        • Mike

          So, fairness does not matter. What matters is whether or not we can pity the person that is unfairly harvested for their earnings? Sounds about right. Thank you for confirming my worst suspicions.

    • guest

      You are so right

  • Mike Reed

    Deep Rooted Problem – No Skin in the Game equals No Interest in Spending… “hey, who cares. It’s not my money”.    If all the services you receive from US Gov. cost you personally nothing, you value them at exactly what you paid for them.  It’s Human Nature, and it IS a factor for voting.  Who in our current western societies would NOT vote for someone promising them something for nothing?… for as long as they can get away with it. 

    • luckyhorseshoe

       Or as Tyler said of the fall of the Athenian Republic:  

       ”A democracy cannot exist as a permanent form of government. It can only exist
      until the voters discover that they can vote themselves money from the public
      treasure. From that moment on the majority always votes for the candidates
      promising the most money from the public treasury, with the result that a
      democracy always collapses over loose fiscal policy followed by a dictatorship.
      The average age of the world’s great civilizations has been two hundred years.
      These nations have progressed through the following sequence: from bondage to
      spiritual faith, from spiritual faith to great courage, from courage to
      liberty, from liberty to abundance, from abundance to selfishness, from
      selfishness to complacency from complacency to apathy, from apathy to
      dependency, from dependency back to bondage.”

    • Guest

      Wait, but that’s not true. Did you not see the map above? The red southern states are among the 10 lowest taxes paid bracket, but those states go Republican.

    • James Johnson

      When you allow a class of folks to run your country who belong to a class that has no IDEA how things are done right here on these streets everyday. The struggles and blood and sweat just to make ends meet and the lost vacation and time off voluntarily given back to company as a personal sacrifice from its workers is not only sad and alarming but it shows just how desperate times we live in whereby some folks working full time if they are allowed to still have to rely on food stamps and standing in line at food banks. This is the America they do not have any idea about. It’s not that they don’t care, they just don’t know.

  • Concerned

    It is very unfortunate that the candidate made such a biased statement to a group of wealthy supporters just so he can raise money for his campaign. Not only that his statement belittles those who are not paying taxes. He should have known the real reasons why they are not paying taxes. I am sure he did but he is playing politics to gain favors. 

    • luckyhorseshoe

      As I said above, it IS unfortunate, just as it was unfortunate that the President chose to go to liberal San Francisco to demean mid westerners and southerners who choose to exercise their Constitutional rights to freedom of religion and to bear arms. Every candidate will slip given the amount of coverage and number of events they attend.

  • Reader

    This is an an excellent article.  Ms. Wicker did a great job of synthesizing the facts in a short, very readable chunk of writing.    Basically, the people who do not pay federal income taxes are exactly who she said: 1) People who make so little money compared to their family size and living expenses that the federal government is giving them a break, 2) People who make such a huge amount of money in various ways that they are able to take advantage of lots of different tax shelters and loopholes to minimize the amount of federal tax that they pay.  Overall, the issue is not so much that 47% of people in America do not pay federal tax, but more what Ms. Wicker mentioned at the end, which is the fact that the percentage of federal income tax that people pay has been falling since the 60s.  The fact is, nobody wants to pay taxes, and American politicians have been pandering to people’s inherently selfish tendencies.  America, time to put your big-person pants on and pay for your roads and bridges, your corn subsidies, your wars, and all of the human suffering caused by the industrial revolution.  It is what it is.  Deal with it.

  • Jaine Wayne

    This is an excellent article in presenting balanced facts on
    a complicated emotional subject.

    I like President Obama. 
    I think he is a good man.  I enjoy
    his family dynamics and his passion for caring. 
    I like Mitt Romney.  He gives more
    to charity in dollars and percent than I will ever do and frankly, I am not
    sure even given his income that I would. 
    He is faithful to his family, does not drink or smoke.  So I level set in that I believe they are
    both good human beings. 

    My key issue is our finances.  We cannot keep spending more than we take
    in.  It is a financial reality and
    nightmare.  Since we spend more than we
    take in we must borrow.  And we borrow
    money from China.  A country that forces
    abortion and treats workers awful; but our ever increasing “need” means
    spending more money and borrowing more money. 
    That scares me.  And keep in mind,
    we overspend almost every single year. 
    Which adds to our debt to China and everyone else that buys our

    Raising taxes on the rich will not solve our overspending and I wish
    people would stop pointing their finger at the rich saying “They are the
    problem” because they are not.  People,
    rich and poor pay the taxes that are required of them.  Raising taxes will help towards our stopping
    the year-over-year over spending but it does not solve both current year
    over-spend and paying back what we owe. 
    It will take a lot more.  It will
    take a long-term overhaul to our entitlement programs.   The money has to be paid back.  Period. 
    Future generations will be paying it back.  Or they need to learn Chinese.  So starting the dialogue for long term
    solutions is critical. 

    Yes, it will involve Medicare, Medicaid, Social Security and
    more.  We must face our reality or our
    reality will forced upon us.

    will likely vote Republican.  I don’t
    agree with them on every issue.  But I do
    think they are primarily focused on long term financial solutions and that is
    what we need right here, right now..

    • anitsirc

      Thank you Learnvest for such a great article! 
      I’m actually glad Mit Romney said those words, because it has motivated a more in-depth discussion of the economic situation, and has brought to the surface many generalizations that are biased and common in followers of both parties.
      I personally do not see a clear-cut solution in any of the programs that either candidate support. I do not see a solution in Obama’s proposed wealth redistribution, which is penalizing people for making money… that goes against what made this country great. And I do not see a solution in Romney’s cut on healthcare and other benefits… If you want a productive country, you need a healthy and educated population that can have a minimum peace of mind and can focus on their work…
      Given that there are tons of other issues besides the economy, I will consider many of those other issues for deciding whom I will vote for. But regarding the economy, I believe americans should accept the fact that none of these two potential presidents will improve our economic conditions moving forward, only we can. We need to take charge of our personal finances – reduce consumption, create savings, live well-below our means, purchase local products, educate ourselves and focus on our personal financial stability – which is what LearnVest is all about. So, Kudos for LearnVest and all Americans that are willing to adjust their actions/lifestyle, to improve their finances, because no matter which president takes charge, the solution will not be a complete one without the effort of each individual to make it work.

    • neddycat

       You might remember that the melt-down of 2008 was caused by tax cuts for the wealthy combined with two unfunded wars and deregulation of Wall Street.  It caused the biggest recession since the Great Depression, which lasted 10 years, and can’t be expected to be ‘fixed” in four years, especially with an uncooperative Congress.  Romney’s plans for getting rid of the deficit are MORE of everything that caused it – more tax cuts, more deregulation – and we can only hope not another war.  I am terrified at the thought of the next melt-down if he wins.  Meanwhile, the economists who are not paid by Republican think tanks say we need to spend more NOW, in order to generate more taxes later which can then be used to pay off the deficit.  Currently interest rates are next to nothing so it is a good time to repair our infrastructure, putting people to work who will pay taxes and support their families. 

      Social security is separate from the deficit, has nothing to do with the deficit, and can pay at current levels for another 40 years.  Small tweaks such as have been done in the past can make it solvent for years to come.  The Republicans want to privatize your social security deductions so Wall Street can gamble it away for you, as they did your 401K in 2008.  Heck, they want to privatize everything and that is maybe the biggest question for this election – do we want to privatize most things, or is there a role for government as a service provider?  And before you answer that question, remember that business exists to make a profit, while government exists to provide services. 

      • luckyhorseshoe

        I have many differences of opinion. As far as I am concerned, the meltdown of 2008 was caused by unintended consequences of well intentioned legislators. In seeking to promote home ownership, Congress created an unsustainable mess. It created a “bubble” just like so many bubbles before.When Congress forces bad business on Wall Street, like mandating bad loans, Wall Street will find a way to profit from anfdoffload the risk of such bad legislation. That is what they did with derivatives. But it is not just Wall Street. The vaunted middle class used their homes as credit cards and got drunk on easy cheap credit. Wall Street is no more responsible than Obama’s precious middle class for the tech boom bust of the 90s and the housing boom bust of the 00′s. Wall Street is no more greedy than Main Street. And it is Clinton, not Bush who was the poster child for capital gains cuts and Deregulation.

        You perpetuate Obama talking points by  referring to tax cuts for the rich, ignoring the explanation in the article above that explains that the Bush tax cuts were MUCH broader than Obama will ever admit.You also ignore the FACT that the Great Depression was not fixed by FDR. It was fixed by wartime spending and the ramp up of industry for WW!!.

        Those economists you refer to as not paid for by the MIlton Friedman loving Repub think tanks are paid for by the Keynesian Democratic think tanks, so it is just a matter of which flavor you like. Chocolate is not necessarily better than Vanilla, just different. Similarly all those scientists who are so unanimous about global warming were equally unanimous whene I was in high school that we were doomed by global cooling and a new ice age.

        More Obama talking points on social security. Most theorists who want to privatize, only want PART of our contribution invested in the market. I am FOR this for three reasons. One diversification. No one should have all of their retirement in one asset class, US Treasuries. Two, money invested in the market  cannot be “borrowed” by Congress. Three, return on investment. Social Security, if we earn the avg amount, contribute the average amount and live the average number of years is a losing proposition. The market goes up and down but in any ten year period it TROUNCES the return paid by social security. Social security is a Ponzi scheme. When FDR passed social security with a payout at 65, the average lifespan was less than 65 so it was never intended to pay out! The market you say was in crisis four years ago is up (using the russell 2000 as a broad indicator) from its April 09 low of 351 to todays 855! If all the different products approximated by social security were to be provided by private, for profit, industry, the disability and annuity products would be much more efficient. At the very least, it should be returned to its original purpose, a safety net and should be indexed so that only the needy get full benefits. It should carry the same stigma as welfare as far as I am concerned and should be totally need based. My taxes pay for social security just like they pay for welfare and the only reason we view them differently is that FDR sold SS in insurance terms.

        Govt exists to provide services . . . wow! I dont even know where to start. Since the progressive movement started, Government has existed to feed upon the people.In fact long before the Progressives. Since Jefferson ignored the Constitution to fund the Louisiana Purchase! It grows without limits. It ignores the Constitution. It comes up with excuse after excuse to expand and concentrate its power. Just like the debt is never paid down, emergency powers once assumed by the govt, are never relinquished.  Our govt is a bloated drag on the economy. It is an expensive, parasitic, intrusive middleman in most transactions. It is NOT the role of government to own stock in banks, run Amtrak, run Fannie and Freddie. These steps should be as abhorrent to us as FDR imprisoning American citizens of Japanese descent, Lincoln suspending habeas corpus and Adams enacting the Alien and Sedition acts.

        I trust Wall Street. I know how to profit from their greed for money. I do NOT trust our government. I dont know how to profit from or mitigate its greed for power. And if I DID figure out how to profit from government, they would just take those profits from me. Both games are rigged, but none so much as the govt.

        • http://profile.yahoo.com/VNVYFCFPGDCUVYEQCBQQGGV5ME New World

          “Mandating bad loans” was only one of many drivers, I agree the government has not helped, but like most problems in our financial markets, the source of every crisis has been too much easy credit and greed. The more money chasing after any potential gain will create bubbles and then a crash.  Someone always gets hurt and it is usually the little guy. This cycle never seems to stop, has been around for a long time, and we just don’t seem to learn.  We are arrogant in our believe that this time it will be different.  What we need is a new culture in this country because the one we have right now is leading us to disaster.  If we don’t stop pointing fingers at each other and start talking to each other and finding consensus on the most important issues we are in trouble.  Let’s start with abolishing the party system, banning lobbiests, regulating markets better, eliminating margin/credit in markets, and holding ourselves and representatves accountable.  There are two sides (maybe more to ever story) and we need to be willing to listen to it, and then act honestly.  Admit we make mistakes and be willing to fix it together.

          • luckyhorseshoe

            Your diagnosis and prescription is different than mine. I The problem is that I do not believe that you can have any system succeed by ignoring human nature. You seem to think that greed and avarice and putting “fair” low on the list are systemic failures so you want to change the system. The problem is that greed and unfair and shortsightedness and impulsiveness are not diseases we can cure. NIH cannot eradicate poverty and hunger with a vaccine. They are human nature, not diseases. The natural state is that all men are NOT created equal. All circumstances are not equal. In America our poor and homeless live at a higher standard of living than their counterparts in most of the world.  Is that a good thing or bad thing? Who is to say? You want to either ignore or fix human nature by changing the system. I put it to you that ANY systemic solution will fall short of your ideals of utopia because systems dont change human nature. You cannot successfully regulate human nature. The party system? Lobbyists? These are not evil, disshonest, unfair things. Only the application of the human element makes them good or evil, honest or dishonest, fair or unfair. You want to muck around with the system, go ahead. Just dont pretend you are addressing the root of the problems you seek to address.  

          • James Johnson

            It all boils down to folks who are elected, are not elected to obstruct or oppose, they are elected to compromise and discuss better policies that are beneficial to the majority. They don’t and should be at least excused and replaced and in some cases tried for treason.

          • luckyhorseshoe

            says who? Many voters today are voting for their candidates to stop or obstruct the policies of the other party.

        • James Johnson

          Your right about the housing bubble. The banks are the culprit here. You place blame on the wrong sources.

          • luckyhorseshoe

            the banks were merely responding to stimuli forced on them by the govt. First the govt mandated bad loans, then it gave the banks the vehicle to slip the inherent risk side of the risk/reward ratio by allowing Franklin Raines to back those bad loans with the taxpayers money. In 2005 when the Congressional Republicans led by Chris Shays tried to stop Fannie and Freddie from buying up all those bad loans on the secondary market, the Dems led by the usual suspects, Frank, Dodd, et al turned the hearings into a racially charged personal defense of “their boy” Raines. It is hardly greed when the banks, faced with govt mandated losses, find a way to avoid the hit by selling off those bad loans. This is why I use the phrase unintended consequences of good intentions. The Dems were trying to push the American dream of home ownership down the food chain while artificially feeding the economy. Admirable intentions. But they werent smart enough to foresee the unforeseen consequences and when it came to light, they were so invested in it that they couldnt see the forest for the trees in 2005 and doubled down on Raines and the risk avoidance. Same outcome as social give away programs devouring the whole budget. Admirable intentions sunk by unintended consequences. The road to financial ruin is always paved with good intentions.

        • Zachary Swaska

          Beautifully written. Absolutely correct.

      • James Johnson

        More money more buying power. Economics. No brainer. (D)
        Less money less buying power. Disaster. short term profits. Failing infrastructure. No brainer. (R)

        • luckyhorseshoe

          When observing something as complicated, entangled and intricate as the world economy, there are no “no brainers”. Believing as you do that there is anything simple about these issues is how well meaning pols inflict such huge damage on us . . . with best intentions of course.

    • luckyhorseshoe

      well put Jaine. I would point out a couple things.

      I recently saw a breakdown of our debt and was shocked. We have all seen the number 16 trillion as the size of our debt. I am doing this from memory but think I am right. China holds 1.3T of that. Japan holds 1.2T of that. The overwhelmingly largest holder of our debt, over 5T, is owed to the Social Security Trust Fund!! Our govt has “borrowed” (stolen?) FIVE TRILLION dollars from our retirement!

      Second. this debt argument all goes back to Keynesian economics. He was the one who came up with the idea that you borrow and spend your way out of economic bad times. I dont pretend to understand economics enough to judge his theory, but I DO know that you cant follow only half of his theory. We are very good at borrowing and spending during bad times but we forget the part about raising taxes and repaying the debt during good times. That goes for Congress under BOTH parties!

      I dont give Bill Clinton much credit for the budget surplus. The tech boom and the economic cycle created huge revenue spikes. But I DO give both Newt and Clinton credit for not spending ALL of the windfall and not forgetting the OTHER half of the Keynesian equation.

    • James Johnson

      So tell me Jaine, what was the situation lets say in the sixties regarding who paid how much taxes and our strong economy, so strong in fact we were able to put a man on the moon? What did a millionaire pay back then? Compared to now?

      • luckyhorseshoe

        apples and oranges. We were still in a post war boom, had much less population to support. Tax code was structured differently, productivity was skyrocketing, baby boom bubble wasnt wreaking havoc on our socialist spending and interest wasnt crushing our budget.

        • James Johnson

          You didn’t answer. Still waiting. What was the witholding on the top earners in the sixties? When America had so much money it funded a war AND sent a man to the moon. How much did they pay in taxes?

          Sent from my T-Mobile 4G LTE Device

          ——– Original message ——–

          • luckyhorseshoe

            again with your effing sense of entitlement ordering me to do your research? Get off your fat entitled ass and do your own research, you lazy ignorant loser. Funding the war and space race on credit has nothing to do with taxes. When your parents told you that were “special”, it was in a “rides the short bus” kind of special, not the “gets to order people around to do YOUR work for you” kind of special. No wonder you are all for entitlements. You obviously have been taught that you are entitled since you were in diapers.

          • James Johnson

            Your just throwing the word entitlement around.You haven’t  answered yet. I’m waiting.

            Sent from my T-Mobile 4G LTE Device

            ——– Original message ——–

          • luckyhorseshoe

            keep waiting loser. You want me to do your work, pay me.

          • James Johnson

            It’s for your benefit. Knowledge and all that. You know.

            Sent from my T-Mobile 4G LTE Device

            ——– Original message ——–

          • luckyhorseshoe

            I already know. You have no knowledge to pass on, just crap. Spread your fertilizer elsewhere

          • James Johnson

            So how much did the rich pay in taxes back then in the sixties compared to taday?

            Sent from my T-Mobile 4G LTE Device

            ——– Original message ——–

          • James Johnson

            Well tell everyone how much the rich paid when America had enough money to send a man to the moon and back. I’ll tell you since your afraid of letting the cat out of the bag. *Today’s income tax rates are strikingly **low** relative to the rates of the past century, especially for rich people. *For most of the century, including some boom times, top-bracket income tax rates were much higher than they are today.*Contrary to what Republicans would have you believe, super-high tax rates on rich people do not appear to hurt the economy or make people lazy*: During the 1950s and early 1960s, the top bracket income tax rate was over 90%–and the economy, middle-class, and stock market boomed.*Super-low tax rates on rich people also appear to be correlated with unsustainable sugar highs in the economy–brief, enjoyable booms followed by protracted busts.* They also appear to be correlated with very high inequality.

          • luckyhorseshoe

            Now tell us the one about how the moon is made of green cheese. Tax rates are meaningless. 90% tax rates are accompanied by huge loopholes allowing you to shelter your income. Bring back accelerated depreciation and miniscule capital gains rates and all the other tax shelter vehicles and I wont pay any taxes no matter how high the rate is. And it was Reagan in ’86 who traded shelter for lower rates, not some progressive Dem. Nice try but as I kept telling you, rates dont matter.

          • James Johnson

            I cannot reason with you. There is simply a block wall and there is no way you will accept facts.

            Sent from my T-Mobile 4G LTE Device

            ——– Original message ——–

    • James Johnson

      So tell me Jaine, How much do we spend on the military behemoth? Compared to so called entitlement programs? Comparison please, and post it for all to see. Thanks .

      • luckyhorseshoe

        in 2014 social security and healthcare led by medicare/medicaid were 48% and defense spending was 17%. Which is the true behemoth? If you add food stamps and unemployment compensation to the “entitlements” side, it rises to 60%. For 2015, defense spending was down 1%, health spending up 1%, social security unchanged. These are CBO numbers. You can make your own determination of what is biased if you prefer GAO numbers or those of the Treasury, be my guest.

        • James Johnson

          Your numbers are fictitious and dishonest. And if you rely on biased information you my friend are contributing to the division we see in our country. And those who divide us and support those who divide us generate a combative situation between countrymen and are treasonous in their opinions and actions.

          Sent from my T-Mobile 4G LTE Device

          ——– Original message ——–

          • luckyhorseshoe

            then get your own damn numbers you lazy P.O.S. You will just reject anything I give you despite my providing my source. I am not your damn slave! You dont get to order me around and then just invalidate the research that you are too effing lazy to do yourself. As for your calling me a traitor because I wont swallow your bullshit, it is clear who the divisive one is here.

          • James Johnson

            Answer please.Itouched a nerve here.Cut deeply.  Please answer.

            Sent from my T-Mobile 4G LTE Device

            ——– Original message ——–

          • luckyhorseshoe

            of course it touches a nerve when you call someone a traitor for having a different opinion than yours. Of course it touches a nerve when a smarmy prick demands I do his work for him. You are not asking a question. You are demanding I do the research to support YOUR argument. And your point is moot since tax rates have nothing to do with borrowing money and running up deficits to “afford” the war and space race you reference. It is well known that Kennedy’s plan, enacted right after he died, CUT taxes to raise revenues, albeit in a Keynesian manner as opposed to supply side, Friedman manner. But since you dont do your own work, you wouldnt know that. Likewise you ask a question that cant be answered since the tax rates were not the same for the whole decade. So you have proven yourself too lazy to do your own work and too ignorant to know why your question and positions make no sense.

          • James Johnson

            Oh stop acting like a child. I’m asking you to research data to measure YOUR opinions against. You don’t have to have a hissy.

            Sent from my T-Mobile 4G LTE Device

            ——– Original message ——–

          • luckyhorseshoe

            I am satisfied with my positions. I did not ask your opinion or for you to grade my opinions. You are entitled to your opinions but you want to make up your own facts and that dont fly. Your bringing up the tax rates from the sixties is a non sequiter; it has no bearing on my stated opinions. So your excuses are merely that. Lies to make you feel better.

    • James Johnson

      Are entitlement programs really entitlement programs? And who pays for them? can you post your NON BIASED findings please? I know the answer do you? Please elaborate. Thanks.

      • Luke Rider

        Yes they are.. middle class and wealthy pay for them. They also fund social security because they pay a larger portion and collect a smaller percentage.

  • luckyhorseshoe

    The part you and most neglect, is that tax policy is less about who should pay than which behavior benefits the country most and thus is encouraged by preferential tax treatment. What is the benefit to the economy of encouraging capital investment by lowering capital gains rates vs sending a one time stimulus check of $400? 

  • mm

    Everyone should have a vested interest in our government because it lead them to pay attention to where our money is going! I work in a hospital and for the most part those who show up at our door are those who pay little or nothing.  And most the these non payers didn’t have to come to the hospital anyway! One lady said she came to the ER because she didn’t have a thermometer and this is why they must pay something! They are acting stupidly and wasting our money!

  • mm

    In New York City 5 years ago you could make over $55,000 collecting government handouts! How fair is that tax code? How about Obummers sister Zeutini who never paid a dime into our system but is pretending she is disabled and collecting our hard earned money? How fair is that.  In my opinion these people are corrupt and think they are superior than others.  Have family members also who could work, but are collecting food stamps and unemployment while they have money for tatoos and partys! It’s gotten to the point where I can’t socialize with these thieves….they are simply lazy and self centered.  Some purposely get fired…I know these people well so you can’t tell me otherwise.

  • Doug

    If the structure of American production economies had been protected the average household wage wouldn’t have dropped, and more could pay more income tax under any tax structure. The correlation of the above chart is perfect with the growth of outsourcing, off-shoring, and increasing trade balance deficits.  The first answer is found in the face of self-evident and quantitative proof in the trade imbalance figures, to the tune of $40B-$50B deficit per month. That’s a -lot- of production jobs, a lot of income tax, and a lot of participation. Those who make statements about 47% who don’t contribute might more wisely point the finger at the cause and actual agents of those who profited from such action. The  solution starts in Congress with the Commerce clause of the First amendment.

  • Cathryn

    Love this article. It shows Romney’s complete stupidity.

  • Let’sbehonest

    “I’ll never convince them they should take personal responsibility and care for their lives.” This is the line that ‘liberal pundits’ are angry about. Romney is implying that he will choose to ignore 47% because they are lazy and irresponsible. When in fact many of them are his base, millionaires and low income people that believe they will become millionaires. Romney never seems to directly address who these people are. Not saying I’m a huge Obama fan but he’s going to defend the people who never had the chance to become a millionaire.

  • Deborah O’Brien

    Did anyone read the article, or do you all just get on the comments section to put your opinion, with no thought, debate, or listening to someone else’s ideas?

  • Feliciabart

    Romney’s comment is inaccurate and lumps different groups of people together who shouldn’t be lumped together.  I am someone who has gotten most of the taxes I pay in back because of having 2 children, being a student, paying daycare, and not making much money.  I pay income taxes all year, but after filing taxes receive it refunded back to me.

     However, there are some people in America who choose to live off the system.  In my current situation, I could do that, but I choose not to.  I am trying to make it as a single-parent, working fulltime, going to school to get a higher paying position.  I receive food assistance and daycare assistance or I would literally be working to pay daycare and put gas in my car to get me to work.  It would be much easier to stay home and have everything paid for by government programs.  I’m not lazy like that.

  • Spmcavoy

    In  this elections, I’m unsure who to trust.

    I personally believe that elected officials in Washington need to stop and take a serious look at all of the mess going on between tax breaks etc and review. I think it would bring all of those issues to light and open some eyes, stopping generalizations.

  • Rightfighter

    Top 10 Percent of Earners Paid 71 Percent of Federal Income Taxes Top
    earners are the target for new tax increases, but the federal income
    tax system is already highly progressive. The top 10 percent of income
    earners paid 71 percent of all federal income taxes in 2009 though they
    earned 43 percent of all income. The bottom 50 percent paid 2 percent of
    income taxes but earned 13 percent of total income. About half of tax
    filers paid no federal income tax at all.


  • Thinking Mom

    It is a real problem.  When half of our population is not making enough to pay federal income taxes.  I am voting for Romney because I believe he will, at last, get some focus on jobs and the economy.  We can buy our own contraceptives if we have GOOD, not minimum, wage jobs.

    Neither candidate is perfect, but Obama totally blew it on the economy and our fiscal needs. New economic advisors must be brought in.

  • http://twitter.com/eagle2758 George Washington

    If BHO is re-elected, we as a country are done. The govt will take our retirements, property, everything to satisfy the machine.

  • Gary

    Excellent article. Yes, Romney incorrectly lumped in retirees and others who are good folks, honestly not required to pay taxes, with the dishonest, “you owe me!” crowd that mainly votes Democratic and hangs out in “Occupy Wall Street” protests. Romney should have been more exacting in describing the folks that he was decrying. I don’t care if you’re Black, Yellow, Green or White….if you vote for the candidate that will “give you free stuff” and allow you to mooch of the rest of us who actually have a work ethic and values….shame on you. These are the people that Romney was really talking about. He should have clearly said so. I think most Americans would have, and do, agree with him on this.

  • TGRohr

    If you are breathing you pay taxes. Gas pump, groceries, fast food, taxed before we get our paycheck and taxed afterward, just go to any store or the above mention places and see if you can walk away without paying taxes. 

    Taxes are being payed by people black, yellow and white. Maybe not the Wealthy, but some of the so-call rich, mid-class and the poor mainly. Wake up and tell the TRUTH. 

  • Smdan444

    “Mitt Romney” need to get the facts straight, out of the 47% paying no federal tax, 44% are seniors, and 7% are billionaires, and 4 out 5 families of that 47% earn less than $30,000 a year so there is not even enough money left for them to feed their family, so how would they pay federal tax.

  • http://twitter.com/thefinancegeek Megan Z Taylor

    Here’s where I’m still confused: when you (or Romney, or anyone else) says people “don’t pay Federal Income tax,” does that mean that they don’t owe any money on April 15th, or that they don’t have federal income tax deducted from their paychecks?  Because I feel like those are two entirely different scenarios.  

    The way I understand it, everyone (unless you truly don’t make very much money) has some portion of their monthly income that goes automatically to federal income taxes (the same way a portion of it goes to social security and medicaid), and if you’ve paid more into the system than you needed to, or have a situation where you can get a tax credit or deduction, you potentially get a refund come April 15 of the next year.  If you didn’t pay enough into the system, then you owe more come tax time.  

    So are the people who owe more at tax time the only people who “count” as paying taxes?  

    If the above is true, then it seems like it would be more accurate to say that everyone (unless they’re elderly or below the poverty line) “pays” federal income taxes throughout the year, and some people don’t owe more when it comes time to file taxes.  

    Am I completely misunderstanding the situation?  

  • moe

    there you go obama fan whats did he change ? god i am so pissed for paying taxes to feed lazy people who dont wanna work and ride the damn system

  • Curious George

    If income tax was just a one year war tax why does anyone pay income taxes today? Nobody should have to pay money in taxes from what you work for only what you pay for. Quit being a sheep complaining about a certain political party like they are different. That’s what they want to distract you from real problems like why we continue posting for a one year war tax from 60+ years ago.

  • Peace Monger

    I think it stinks. Our income was $117840 in 2014 and we paid $29094 total in fed, state, Medicare, SS, etc. after the refund. That’s 24.7%. Our actual take home was $88746. This proves you can earn a lot and work hard in America and barely eek out enough to live on when you retire while all the leaching loser families who can’t earn jack pay no fed taxes and are given free money for EIC. Thanks American politicians for changing the land of opportunity for hard workers into the land of opportunity for freeloaders.

  • James Johnson

    Does the chart coincide with less taxes more deficit? What did this chart (same exact one) look like for instance when we put man on the moon? It seemed the economy goes up and down in exactly the opposite direction as taxations up and downs. Am I right in this assessment? And if I am can you display this contradiction? It would be far more telling and direct.

  • baboon123

    The article does say how many of people not paying taxes have unreported income.

  • E;f

    Nice slanted LIB article by a HuffPo. Not even close to the truth.

  • Skyler Harris

    I don’t know why everyone else doesn’t pay federal, but I don’t pay it for 3 reasons, all of which are 100 % true and anyone can fact check, because its on paper.

    1. There is no law on the federal books that states you are required to pay. It is strictly an IRS made regulation. Search all you want, you won’tt find it.

    2. The number of states required to ratify the law that was originally written was never met. This has even been stated by Supreme Court judges.

    3. Tax laws that are on the governments books clearly state that any taxes imposed upon the American people must be shown to serve some sort of public interest. in other words, it has to be used for something the people will benefit from in some form. Income tax is a direct unapportioned tax, all of which goes towards one place only, paying the interest on our currency that we have loaned to us from the federal reserve, which is an independent company that does not operate within any government guidelines. This makes it unconstitutional, therefore I do not pay. To put it bluntly, not one cent of income tax goes to anything that helps the American people, but into the pockets of an independent agency that does not serve the public good. We as a country do not produce our own currency. And a country that can’t do so, is no longer a sovereign nation.

    But I do however pay every other tax that is required with no problem at all.