NYT's Leonhardt Dismisses How Almost Half Pay No Income Tax, Calls For Higher Rates on Those Who Do
In his Wednesday Business Day column, David Leonhardt, the New York Times' conscience on economic matters, defended the current skewed tax system, in which almost half of U.S. households paid no income taxes last year, and even argued that those now paying the highest rates should be paying more: "Behind The 47% Talking Point."
Leonhardt never addressed the underlying point of conservative opposition: The free-rider problem, as half of households pay nothing for services that (theoretically) benefit them all, like public education and national defense. Citizens with no "skin in the game," safe in the assumption they will never have to pay federal taxes, have little practical incentive to oppose programs that will lead to higher taxes, like Obama-care.
That's the portion of American households that owe no income tax for 2009. The number is up from 38 percent in 2007, and it has become a popular talking point on cable television and talk radio. With Tax Day coming on Thursday, 47 percent has become shorthand for the notion that the wealthy face a much higher tax burden than they once did while growing numbers of Americans are effectively on the dole.
Neither one of those ideas is true. They rely on a cleverly selective reading of the facts. So does the 47 percent number.
The answer is that tax rates almost certainly have to rise more on the affluent than on other groups. Over the last 30 years, rates have fallen more for the wealthy, and especially the very wealthy, than for any other group. At the same time, their incomes have soared, and the incomes of most workers have grown only moderately faster than inflation.
Leonhardt eventually admitted that "The 47 percent number is not wrong," but claimed the figure is misleading, because that 47 percent do pay other kinds of federal taxes, like payroll taxes, and he dismissed the argument that those kind should be excluded from the discussion since they pay for benefits on the back end. To defend the figure, Leonhardt unwittingly demonstrated Social Security and Medicare are a lousy deal for people with the bad luck to die before age 70.
I realize that it's possible to argue that payroll taxes should be excluded from the discussion because they pay for benefits - Social Security and Medicare - that people receive on the back end. But that argument doesn't seem very persuasive.
Why? People do not receive benefits equal to the payroll taxes they paid. Those who die at age 70 will receive much less in Social Security and Medicare than they paid in taxes. Those who die at 95 will probably get much more.
Does this mean that African-American males, whose life expectancy is slightly less than 70 years, should oppose Social Security and Medicare as a raw deal?
Leonhardt vaguely raised another conservative point, only to dismiss its importance, and called higher taxes on "the wealthy" the American way of life:
There is no question that the wealthy pay a higher overall tax rate than any other group. That is an American tradition. But there is also no question that their tax rates have fallen more than any other group's over the last three decades. The only reason they are paying more taxes than in the past is that their pretax incomes have risen so rapidly - which hardly seems a great rationale for a further tax cut.
CNN's Christine Romans got more specific on the April 8 edition of "American Morning," emphasizing "Ten percent of earners pay 73 percent of all the federal income tax revenue."
Leonhardt claimed not to see a principled argument against the current skewed tax system, arguing opposition was just self-interest on the part of conservative talk show hosts:
So why are those radio and television talk show hosts spending so much time arguing that today's wealthy are unfairly burdened? Well, it's hard not to notice that the talk show hosts themselves tend to be among the very wealthy.
Clay Waters is editor of Times Watch. You can follow him on Twitter.