The president is pitching a tax increase this week for people who make more than $1 million a year. He says those folks should pay an amount that’s more realistically their “fair share.” Inspired by billionaire Warren Buffet, not surprisingly, it’s called the Buffet Rule.
One of the main arguments against the Buffet Rule is that it would raise only about enough money to run the country for, depending upon whom one chooses to quote: four days, or maybe 17 hours, or maybe something in between — something less than $5 billion a year won’t go very far by anyone’s math.
Another argument notes that the so-called “1 percent” already pays 70-80 percent of all the money the U.S. raises through income taxes and if that’s not astounding enough, 48 percent (I’ll use 150 million for convenience) of America’s population, give or take a few, don’t pay any income tax at all. That figure is shocking at first blush. How can it be that so many people don’t pay income taxes?
It’s no wonder that some of those who do pay hefty chunks might feel a little put-upon, especially when asked to pay even more. That number has troubled me for some time as I’ve tried to better understand it. And finally, I decided to check into the data. The arithmetic is kind of squishy but probably about as close as it needs to be.
Most recent Census numbers put the U.S. population at approximately 313,232,044. Of that total, rounding slightly up or down for the sake of simplicity, 20 percent of us are between the ages of 0 and 14 (call it 62 million). About 69 percent of us are somewhere between 15 and 64. And a tick over 13 percent of Americans are 65 and older.
I don’t know anyone 14 years old or younger who pays federal income taxes. I’m sure some of the kids in the entertainment world do and they probably pay a lot, but there can’t be that many of them — statistically non-existent I’d imagine.
So if we subtract the estimated 20 percent (62 million) from the 48 percent (150 million) who don’t pay income taxes, we get a figure that’s easier to understand. About 88 million Americans over the age of 14 don’t pay income taxes. That’s still a lot of people but much more tolerable than the 150 million.
Frankly, I don’t know anyone between 15 and say 21 who likely pays anything substantial in taxes either. They’re not expected to at that age. Many are probably still on their parents’ exemption or dependent status. So, we can’t blame them for not being contributors. Surely there are a few million working full-time at steady, well-paying jobs who pay their fair share or more, but then they wouldn’t be counted in the remaining non-paying percentage.
The U.S. Census Bureau categorizes about 22 percent of Americans as “disabled.” That’s roughly 65 million people, many of whom no doubt do pay taxes, but probably many more who don’t. The same data considers 53 percent of people over 50 years old as disabled. The older and more disabled that element of the population is, the less likely they are to pay taxes, so they can reasonably be counted in the non-taxed total. Suppose we take an easy-to-work-with 40 million and count them into the non-paying mix.
The 62 million under 14 and the 40 million disabled and/or disabled-elderly gives us about 102 million folks who probably don’t pay income taxes. Surely, those who chastise the non-tax-paying 48 percent don’t mean to suggest that kids under 14 and two-thirds of disabled and/or disabled-elderly aren’t paying their fair share and should be taxed straightaway. Surely they don’t mean that, do they?
Now, we’ve got around 32 percent of the population who not only don’t pay income taxes, but by all rights, shouldn’t be expected to and shouldn’t be lumped in with all the others who don’t pay income taxes.
If we deduct 102 million from our base number of 150 million (the original 48 percent), we have approximately 48 million Americans not paying income taxes. Let’s say 10 million of the 15 to 21 year olds don’t pay taxes for the reasons noted above. Maybe it’s eight million or maybe it’s 15 million, but 10 seems a usable number. Forty-eight minus the 10 leaves 38 million who don’t pay income taxes — for reasons we don’t know for sure. However, we do know that instead of a seemingly unreasonable 48 percent of Americans who don’t pay taxes, we have about 12 percent who are not paying their fair share, as far as we know.
I’m sure most of us could live with 12 percent of our population not paying income taxes, the young, and a reasonable percentage of the disabled and disabled-elderly. How about the just plain, aged folk, on some fixed, relatively low amount of Social Security. They’re not disabled. They’re just too old and too poor to have an income tax obligation. Say there are four million of them. That brings the number of non-tax-paying Americans down to approximately 34 million. We still don’t know how many of them should but don’t pay taxes, and conversely we don’t know how many of them should be tax-exempt for good reasons.
However, instead of being shocked that 48 percent of Americans don’t pay income taxes, maybe we should refine the concept and dig out the reality. It looks like the reality (even considering some squishy math) is that about 10 percent of Americans are not in fact paying taxes and we don’t know why — especially on any given day. We don’t know how many of that number are practicing criminals or fleeing felons, or are in comas or living off the grid. Many probably have little or no income and some probably are simply not filing and therefore not paying their fair share.
What we do know is that this country has a tax code that runs to something like 80 thousand pages. That’s a lot of paper to get lost in. If it were a dozen pages instead, we’d probably have a much clearer view of where our money comes from and where it goes and who is or is not paying their fair share.
Chris Daley is a staff writer and columnist for the Mountain Democrat. His column appears each Friday.