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Back in the 1980's, President Ronald Reagan hailed the expansion of the Earned Income Tax Credit (EITC) as "the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress." But as Tax Day approaches, conservatives have forsaken their patron saint, decrying the "redistribution of wealth" for working families provided by the EITC and other tax relief delivered by President Obama. If that sounds familiar, it should. Even as income inequality hit record levels, Republicans during the 2008 campaign called it "welfare."

Conveniently ignoring the fact that total federal taxes as a percentage of GDP have remained roughly 20% since the 1950's, the always execrable Jonah Goldberg on April 6 marked the approach of Tax Freedom Day by claiming "another perfectly good word for it is 'slavery' or, if you prefer, involuntary servitude." Sadly, the Associated Press the next day amplified Goldberg's charge that "We are heading toward being a country where instead of the people deciding how much money the government should have, the government decides how much money the people should have."

In an article titled, "Nearly Half of US Households Escape Fed Income Tax," the AP echoed Ari Fleischer's 2009 charge that "50% of the country gets benefits without paying for them":

Tax Day is a dreaded deadline for millions, but for nearly half of U.S. households it's simply somebody else's problem.

About 47 percent will pay no federal income taxes at all for 2009. Either their incomes were too low, or they qualified for enough credits, deductions and exemptions to eliminate their liability. That's according to projections by the Tax Policy Center, a Washington research organization.

But in Republican shorthand dating back to the McCain campaign, that statement morphed into an accusation and a fraud: 40% of Americans pay no taxes.

This canard has been in circulation since the summer of 2008. Parroting right-wing papers including the Wall Street Journal, the Washington Times and Richard Mellon Scaife's Pittsburgh Tribune Review, the McCain campaign argued:

Leading papers call Obama's taxes "welfare"..."government handouts".

Obama raises taxes on seniors, hard working families to give "welfare" to those who pay none. Just as you suspected, Obama's not truthful on taxes.

While Sean Hannity and Rudy Giuliani regurgitated the "welfare" charge last January, former Bush press secretary Ari Fleischer kept up the drum beat for Tax Day 2009, deeming Obama's middle class tax cuts a "moral problem" when "50% of the country gets benefits without paying for them."

Of course, they do pay for them. And as the data show, Republican assertions to the contrary represent willful ignorance at best and sheer duplicity at worst.

First, as FactCheck, Salon, the Washington Monthly and the New Republic among others quickly pointed out in the fall of 2008, the Republican brain trust is intentionally sidestepping the fact that essentially all working Americans pay Social Security and Medicare payroll taxes starting with very first dollar they earn. Importantly, as the nonpartisan Tax Policy Center concluded in a 2003 analysis, "three quarters of filers pay more in payroll taxes than in income taxes." And as Robert Gordon and James Kvaal noted at the New Republic during the 2008 race:

"It is true that Obama has proposed several tax credits that include families who earn too little to owe income taxes, a group that include about half of families with children. But many of these families work and pay thousands of dollars in other taxes. For example, a family of four must earn about $25,000 before owing income taxes--but they must pay payroll taxes on the first dollar they earn. Indeed, Obama's biggest refundable credit ['Making Work Pay'] is designed to cushion the blow of payroll taxes."

It is with good reason that Salon deemed the shared critique of the Congressional GOP and its allies at the Wall Street Journal, "economic illiteracy."

Which brings us to the second part of the Republicans' fraudulent charge. That millions of hard working American families pay no income taxes is due in large measure to the Earned Income Tax Credit. Created in 1975, the EITC "a refundable federal income tax credit for low-income working individuals and families" that results in a tax refund to those who claim and qualify for the credit when the EITC exceeds the amount of taxes owed. As the Center for Budget and Policy Priorities detailed in 2005, the EITC has not only been extremely successful in reducing poverty, it has enjoyed broad bipartisan support:

The Earned Income Tax Credit has been found to produce substantial increases in employment and reductions in welfare receipt among single parents, as well as large decreases in poverty. Research indicates that families use the EITC to pay for necessities, repair homes and vehicles that are needed to commute to work, and in some cases, to help boost their employability and earning power by obtaining additional education or training.

The EITC has enjoyed substantial bipartisan support. President Reagan, President George H. W. Bush, and President Clinton all praised it and proposed expansions in it, and economists across the political spectrum - including conservative economists Gary Becker (a Nobel laureate) and Robert Barro, among others - have lauded it.

While Giuliani and McCain are apparently now content to side with the likes of Newt Gingrich and Phil Gramm in terming EITC recipients "lucky duckies," they sadly find themselves fighting the Gipper himself.

While many of his conservative allies expressed disdain for the working poor, Ronald Reagan championed the refundable Earned Income Tax Credit. As the American Prospect recalled in 2006:

Almost 20 years ago, as he signed into law the tax bill expanding the Earned Income Tax Credit, President Ronald Reagan hailed it as "the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress."

It's no wonder John McCain in 1999 called the EITC a "much-needed tax credit for working Americans."

But that was then. In 2009, wiith Democrat Barack Obama in the White House, tax credits for working Americans represent, in the words of South Carolina Republicam Jim Demint, "a mugging" and a "slide towards socialism."

Now, one year later, President Obama in the stimulus package delivered as promised tax relief for over 95% of working American households. The result, as USA Today reported on March 23, is that the "average income tax refund jumps by 10% to $3,036."

Yet you'd never know it from the incendiary rhetoric of Republicans and their Tea Party acolytes. While a recent CBS poll found that "of people who support the grassroots, 'Tea Party' movement, only 2 percent think taxes have been decreased, 46 percent say taxes are the same, and a whopping 44 percent say they believe taxes have gone up." And as former Reagan Treasury official Bruce Bartlett documented, Tea Bagger believe that the share of American GDP goes into the (federal) public sector was 42 percent--more than twice what it actually is.

Citing data and the helpful chart above from the Tax Policy Center, Tom Schaller at FiveThirtyEight notes:

Income taxes as a share of GDP have held steady during the same time period. Corporate and excise taxes, paid mostly by businesses and which conservatives complain are inefficient and simply passed through to consumers anyway, have gone down as a share of that 20 percent. What's gone up are payroll taxes which fund programs like Medicare and Social Security that the same tea partiers were warning Obama and congressional Democrats not to touch in the same breath they were complaining about the socialist expansion of the healthcare system.

But if Jonah Goldberg and the Tea Party activists he so vociferously defends are truly worried about "incipient tyranny," they should be looking in a different direction. The search for equity in the American tax system should start at the top.

As the Center for American Progress noted, the Bush tax cuts delivered a third of their total benefits to the wealthiest 1% of Americans. And to be sure, their payday was staggering. The Center on Budget and Policy Priorities detailed that by 2007, millionaires on average pocketed $120,000 from the Bush tax cuts of 2001 and 2003. Those in the top 1% stashed an extra $45,000 a year. As a result, millionaires saw their after-tax incomes rise by 7.6%, while the gains for the middle quintile and bottom 20% of Americans were a paltry 2.3% and 0.4%, respectively. (Other CBPP studies demonstrated that the Bush tax cuts accounted for half of the mushrooming deficits during his tenure in the White House and will continue to do so over the next decade.)

And as the New York Times uncovered in 2006, the 2003 Bush dividend and capital gains tax cuts offered almost nothing to taxpayers earning below $100,000 a year. Instead, those windfalls reduced taxes "on incomes of more than $10 million by an average of about $500,000." As the Times revealed in a jaw-dropping chart, "the top 2 percent of taxpayers, those making more than $200,000, received more than 70% of the increased tax savings from those cuts in investment income." So it should come as no surprise that over the past decade, the income share of the 400 richest American taxpayers doubled even as their rates were halved.

As Gus Lubin put it in "15 Mind-Blowing Facts About Wealth And Inequality In America":

The rich are getting richer and the poor are getting poorer. Cliche, sure, but it's also more true than at any time since the Gilded Age.

The poor are getting poorer, wages are falling behind inflation, and social mobility is at an all-time low.

If you're in that top 1%, life is grand.

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But as Jon Kyl made clear in the Republican response to President Obama's Saturday radio address, that upward redistribution of income and wealth will be far from over if the GPO gets it way. While Obama wants to roll back the budget-busting Bush tax cuts for those earning over $250,000 year, Kyl repeated the Republican call to make them permanent. And Kyl, who played a critical role in blocking the renewal of the estate tax for 2010, wants to eliminate it altogether in a multi-billion dollar giveaway to just 1 in 500 American families.

That's the kind of wealth redistribution wealth that would make even Ronald Reagan blush.

(For more background on this and other GOP frauds, see "10 Republican Tax Day Lies.")

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41 Comments
Alice X - Chomsky Nader's picture

We have had a massive redistribution of the wealth in last thirty years. From those who have very little to those who have a great amount.

This has come in various forms the biggest ticket items being direct welfare for corporations.

While Obama's ARRA did instigate tax relief for the working class, it also legalized the the illegal Section 382 tax dodge that Hank Paulson pulled off with almost no one noticing, and no one commenting since.

This was a corporate tax windfall of several hundred billions to the Banksters.

We the peons have been plundered time and again.


statusquObama, change you can only pretend in

VegasRage's picture

we were on a 40% gold exchange standard until 1971 when the tie was severed and we all went fiat and have been deficit spending ever since. Both parties have been guilty in this period of printing us into this hole via deficit spending.

Dem's tax and spend, the Rep's lower taxes and just spend it. Neither party including Obama is doing enough to tighten the belt and expand the income circle to lead us out of this mess.


Goodnight, Frau Blücher

he said ..He also said that nuke removal was what his life goal was... Contortionists in the repub group are foolish to deny the past to obstruct the current Administation...Fools --corporate shills and the party of no...Not for the American people..typically ANTI AMERICAN REPUBLICAN foolishness!

savannah43's picture

I think not.

project's picture

With the small amout of brain power in the republican party that maybe we could give them about 10% of ours. Hell that would be 100 times more then they have now.
republicanism/conservatism is a mental illness! That has killed the economy and god only knows how many people!

fiver's picture

The wealthiest of the wealthy celebrate the second lowest tax rates that they've had in over a half a century.

But they can celebrate even more next tax day. Their lowest tax rates, including an estate tax of zero, are in effect right now, in 2010.

Too bad for those poor, poor hedge fund managers. The top 25 people took 25 billion dollars in 2009. If they'd waited till this year they could have paid even less in taxes.

Ah, to be wealthy in America.

But that's ok, come 2014 the rest of us can celebrate with an additional $800-$2,000 (or higher) monthly tax paid directly to private "enterprise," and cut out that nasty middle-man.


Corruption favors the wealthy.

VegasRage's picture

I quoted yesterday but worth quoting again

"Give me control of a nation's money and I care not who makes the laws"
Baron M.A. Rothschild

Obama doesn't run the show, he is just doing the FED's bidding. Look who's on his advisory panel, Geithner, Summers, Rubin. This is a no brainer.


Goodnight, Frau Blücher

fiver's picture

And some will always buy in. Yawn.


Corruption favors the wealthy.

miss_kitty's picture

in 3,2,1...

Milquetoast's picture

...off


audit-prosecute-incarcerate

fiver's picture

Anybody have an eye-dropper or a spare thimbleful of water?


Corruption favors the wealthy.

Milquetoast's picture
[Comment Deleted By Administration For Violation Of Terms Of Service]

audit-prosecute-incarcerate

fiver's picture
~

deleted by user


Corruption favors the wealthy.

ysbaddaden's picture
)O(

Diabolus est Deus Inversus

Milquetoast's picture
(!)

audit-prosecute-incarcerate

VegasRage's picture

If you learn the history of money then you will know the biggest scam was the Federal Reserve. Just because you are accustomed to their existence doesn't mean it's good, learn about fiat currency and real money and you will not deny what I am saying.


Goodnight, Frau Blücher

stewartm0205's picture

that most economists keep missing the correlation between the drop in the marginal tax rates for the rich and the subsequent depressions. Not one of them ever mentions it. The major problem is that the excess money that the rich have as a result of the lower tax rate ends up fueling wild speculation which will always end in a depression.

That correlation is interesting, to say the least.

I’m guessing that most economists expect that excess dollars would go back into valid economic investment. If that is done, it should stimulate growth. Instead that money always seems to go toward financial speculation (i.e. gambling), which helps no one but the winners of the bets. We then get a house of cards that collapses at the end of every one of these bubble cycles.

Tax the Rich's picture

It's not that they don't mention it, it's rather, they are doing everything in their power to make sure it never does get mentioned.


If I were a psychopath, I would join the republican party, and get in on the gravy train taking the Teabircher morons to the cleaners.

ron's picture

and many of us wouldn't mind paying taxes, unlike you filthy greedy regressive bastards.

Peter G's picture

that it is a self perpetuating disparity. Rich people love recessions. That's when you pick up assets for pennies on the dollar. The economy will recover and they'll own a bigger piece of it than before.


Hasa Diga Eebowai

ysbaddaden's picture
)O(

republicans and taxes are a funny subject:

Bail the fat cats out with tax payer's money, after privatizing the gains

Justify tax shelters for the wealthy "to create jobs"

Give tax breaks for whatever the wealthy pay "to create jobs"

But then out-source the jobs in the name of excessive taxation

Sneer at the working classes for wanting some tax cuts of their own since they pay primarily payroll taxes

But claim the tax boogy-man is after them if they allow new tax laws

And heaven forefend if the working classes actually want to see some benefits from the taxes they pay.


Diabolus est Deus Inversus

Tax the Rich's picture

Perfect.


If I were a psychopath, I would join the republican party, and get in on the gravy train taking the Teabircher morons to the cleaners.

Justify tax shelters for the wealthy "to create jobs"

They do so naturally while ignoring the other half of the equation:labor.Without which,nothing would ever be manufactured or produced.Without labor,they're um..what's the word I'm searching for here again...oh yes..They're "fucked".


"To me, truth is not some vague, foggy notion. Truth is real. And,
at the same time, unreal. Fiction and fact and everything in between,
plus some things I can't remember, all rolled into one big "thing."
This is truth, to me. "

-Jack Handy

Captain Kangaroo's picture

The trouble the Republicans are having now is that to be anti Democrat they are also being anti "Past Republican" or "anti Reagan". They are "anti themselves." Sadly most are too stupid to realize. We can educate them though. Just keep hammering away at them. The best at doing this is Maddow.

Peter G is right on. These mofos get to feed off what the middle class loses in these times and get richer. Soon we will be back to the "good old days" of haves and have nots with nothing in the middle. Thanks Repukes.

ron's picture

are the middle where if they recognized where the middle is, it would be clear that they are far below it.

osage's picture
[Comment Deleted By Administration For Violation Of Terms Of Service]
fiver's picture

Republicans didn't re-appoint Ben Bernanke; that would be Obama.
Republicans didn't appoint Tim Geitner (who doesn't even have to pay taxes); that would be Obama. Republican didn't drop the windfall profits tax; that would also be Obama. Republicans couldn't get the industry's health insurance bill passed; that would be Obama and the Democrats.


Corruption favors the wealthy.

Annoyed Canuck's picture

Great charts, good points.

But you didn't include the growth in public debt - a crucial factor in the financial crisis, the Great Recession and the fiscal bailout still in process.

Public debt exploded as a direct result of the tax cuts enacted by Reagan and subsequent Republican presidents and congresses. In 1945, public debt in the US stood at 110% of GDP. This figure declined steadily for 35 years, to below 40% of GDP.

Consider that fact - through the massive government expenditure on the Cold War military buildup, the space program, Vietnam, Medicare, LBJ's Great Society programs - the economy grew and government debt continuously fell as a percentage of national income.

Until 1980, when Reagan signed the Kemp-Roth tax cuts. Look at this chart:

http://en.wikipedia.org/wiki/File:USDebt.png

The so-called 'fiscal conservatives', the tax-cutting neocon monetarists, created a debt spiral.

For the next 28 years, to the election of Barack Obama, US national debt increased by a factor of 11 in nominal terms, from $1 Trillion to $11 Trillion. Over the same period, GDP grew by a factor of only 5 times, from $2.77 Trillion to $14.2 Trillion. For 30 years, AS A DIRECT RESULT OF REPUBLICAN TAX POLICIES, federal debt compounded at TWICE the rate of economic growth.

This doesn't even take into account the explosion in unfunded future liabilities (the anticipated costs of Social Security, Medicare, the Seniors' Drug Benefit, public pension shortfalls, etc) that add up to $50 Trillion or more.

The Reagan Boom, and most subsequent economic growth, is based on a pathological increase in public borrowing from future generations, planned and enacted, mostly, by delusional free-enterprise Republicans.

History will not judge them well.

I think the Dems need to start really pounding the GOP on their continuing divergence from their great patron Saint Reagan.
They should express all the faux "regret" and "disappointment" if not "shock" and "outrage" that this group has strafed so far right that "Dear Ronald Reagan just doesn't seem to *sniff* measure up any more..*sob*.. with these "radical" right wingers.He just doesn't seem to *sigh* "cut it" with this crowd for some reason....
I mean..what's happening to America these days??? *sigh*
Just lay it on with a fucking trowel.


"To me, truth is not some vague, foggy notion. Truth is real. And,
at the same time, unreal. Fiction and fact and everything in between,
plus some things I can't remember, all rolled into one big "thing."
This is truth, to me. "

-Jack Handy

I'm getting so tired of all this self righteous crap. Like the entire country is living off the sweat of their brow. They are all hard working patriots and the rest of us are scum. What happened to your reward is in heaven?

Seriously though. . There certainly IS income redistribution going. Go look and see where the wealth and more importantly the income is going. Any casual investigation will tell you it is in the opposite direction they claim.

Half the country makes under 40,000 a year. The vast majority of those people work for a living. If 50% of the people aren't paying taxes it means two things. 1. There are large numbers of people just getting by... or not. That should make one feel pain not hate. 2. With a number that high logic would insist that many of THEM are among those not paying.

Tax the Rich's picture

I am all for talking about taxes and welfare.

Corporate welfare and Wall Street wefare is out of control in this country, and these billionaire welfare queens don't even pay taxes!
Sound the horns! Scream it from every hilltop and valley. Stop upper class welfare!

Of course, reality checks of this magnitude may send many a tea bagger into convulsions, but, since they don't want any health care (socialism), we can just dump them on the hood of their cars and leave them in the hands of fate.


If I were a psychopath, I would join the republican party, and get in on the gravy train taking the Teabircher morons to the cleaners.

Gazenthia's picture

Someone needs to remind them that paying taxes isn't an option. These stories are always worded so that it seems as though the wealthy are all just really generous people whom we leech off of. No... that disparity you see there has nothing to do with willingness to contribute.

If they are not paying into the system it's because they CAN'T. They don't earn or own enough to pay taxes.

The wealthy, on the other hand, really DO have that much more than the rest. Yes, THAT MUCH MORE. But they don't want you to see it that way.

It's that simple.

ronspri's picture

True. It's sad for them to pretend income taxes is it. Buy gas? You pay taxes. Buy cigarettes. You contribute huge amounts. The list is endless.

The idea that only they are "pulling the wagon" is self importance run amok.

Nobodycouldhavepredicted's picture

Fleisher: "About 47% will pay no federal income taxes at all for 2009."

Right back at 'ya:

What you're really saying Mr. Fleisher is that 47% of working Americans do not earn enough money to pay taxes; do I have that correct? And what did the Bush administration do to correct this horror, besides trying to kill the minimum wage increase?

jamesscaminaciiii's picture

Jon,

Great post. Thanks for doing all the heavy lifting with your diligent research and insightful analysis.

Your analysis leads into the kind of politics we can expect over the next few years and the two very different visions of America, both as a society and a democracy, that are in conflict.

The middle class is being destroyed by the oligarchy. They have already done a great job of severely damaging organized labor.

I would suggest that we re-name the Grand Old Party the Grand Oligarchy Party since they defend the economic elite as individuals and as corporations--the Wall Street casino owners and their executives; the pharmaceutical and health care insurance industry and its executives; the oil, gas and coal industries and their executives; and, the Internet communication companies (Net Freedom) and its executives.

As Simon Johnson put it regarding the Wall Street casinos, it is time to break up the oligarchy. It's also time to redistribute America's wealth down to the middle class, working class, and the poor.

We need a more progressive, transparent, and simplified tax structure.

We tend to overlook the earmarks that increase the wealth and income of the elite, and changes in tax rules in the IRS Code that do the same without being identified as a tax cut. We tend to overlook the direct federal subsidies to corporations and corporate "farmers" that increase their income and net wealth.

Businesses, large and small, will not find customers to buy their goods and services if they are being reduced financially to being barely able to afford necessities.

5kfun's picture

With the exception of the Obama years the Democrats have actually been successful in paying for what they spend. Thats the whole thing with tax and spend, you need to tax in order to spend - the GOP doesn't seem to understand that, the Dems do!

Terrible's picture

when they're not for the wealthiest 5%.

TheToonguy's picture

I mean every time they speak to the public it's about how much the "common man" is being over taxed. And now we have proof that that isn't so and now their true colors are shown - they can't stand the thought of lower taxes for ordinary Americans!!

Since the inequality of workers' pay to executive pay is now above 300x (I've read recently 314x) government should set limits.
I proposed some time ago that a factor should be established (by industry maybe) that would demand that no executive be paid more than the factor x average workers' salary.
A company where the average worker earns $40,000/yr would cap the executives' pay at $400,000 if the factor is set at 10, or $800,000 with the factor at 20.
Raising executive pay would require raising employee pay, raising employee pay would permit executive pay to rise.


If you need funds to pay for essentials, you have a revenue problem
If you need funds to pay for frivolity, you have a spending problem

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