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Romney's Income Tax Rhetoric Misleading

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The video that emerged late Monday in which Mitt Romney notes that 47 percent of Americans pay no federal income taxes begs to be put into context. Fortunately, the nonpartisan Center on Budget and Policy Priorities has done just that in an updated report.

That 47 percent figure has become a talking point among some right-wing thinkers, symbolizing what they see as a society dangerously split between "makers" and "takers." Needless to say, they consider themselves among the "makers," while the "takers" are people who rely on government assistance to meet their basic needs.

If you accept that framework, the notion that almost half the public is somehow dependent upon government can come across as both inherently unfair and frighteningly unsustainable.

But as the 10-page summary points out, the figure is wildly misleading on several levels.

It notes that many families who don't pay any income tax still have to pay the Social Security payroll tax. Only 17 percent of American households pay neither. That alone decreases the percentage of "takers" quite dramatically.

Moreover, the report emphasizes that the 47 percent figure is a temporary statistic, the result of the recession.

"In 2007, before the economy turned down, the share of households with no federal income tax liability stood at 40 percent," it states. "In 2009, two factors combined to cause a large, temporary spike in the share of Americans with no net federal income tax liability--the recession, which reduced many people's incomes, and several temporary tax cuts (that have since expired)."

Due to that combination of circumstances, the share of households that paid no federal income taxes rose to 51 percent in 2009, the recession's height. But here's the thing: As the economy has gradually improved, that figure has decreased over the past few years.

"The federal income tax system did what it is supposed to do during the recession--take a smaller bite out of people's incomes," the center explains. "As the temporary tax cuts expire and the economy and incomes strengthen, people's tax liabilities will rebound."

Indeed, by 2011, they rebounded to the point where 46.4 percent of households owed no federal income tax in 2011--the apparent source of Romney's "47 percent" figure. But as the center notes, that figure is far from static, and economists expect it will continue to decline as the economy continues to improve.

Of those families who pay no federal income tax, approximately 61 percent have incomes under $20,000, which is less than the sum of the standard deduction and the personal and dependent deductions they qualify for.

Another 22 percent are elderly people who benefit from targeted tax provisions, such as the exemption of Social Security benefits from income taxes for those who have incomes under $25,000 (or $32,000 for joint filers). The rest include students, people with disabilities, and low-income families with children who qualify for certain tax credits.

If you're a senior who is not paying federal income taxes on your Social Security benefits, does that really make you a "taker"?