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A Letter to the 47%ers

I know who many of your are. I wrote about you in an article titled Who Pays No Tax at All? The math was easy. You’re a couple making just under $60,000 per year, maybe split 50/50, maybe one spouse working full time and the other, shorter hours to be home for when the two kids get home from school. You’re trying to save a bit in your 401(k), 6% to get your company match. Of course we’re talking about federal tax, you still pay into Social Security, just over 6% of your income in normal years. I’ve been thinking about you. You work in an industry where your company is profitable, so by definition, you contribute to society by getting paid less than you produce and help a company grow and provide a good or service to others. Your taxes are simple enough you use a free online version of TurboTax, and you were a bit surprised after having kids that the child tax credit along with their exemptions wiped out the last bit of tax you would have paid. You have no loopholes, just a tax return that showed zero. You’re like many others in a similar situation, looking to get a raise or promotion and when the kids head off to college, you’ll be seeing an annual tax bill, not huge, but still, a few thousand.

Some of you are Veterans returning home, struggling to get back into the work force. I don’t think we do enough for those returning from the multiple wars I’ve seen in my lifetime. One of the charities I donate to on a regular basis is the New England Center For Homeless Veterans. I appreciate the work they do, and that they are more than a shelter, they provide job training and counseling to get returning Vets back on their feet. You risked your life serving your country and I certainly don’t begrudge you a time when you’re not paying into the system.

Perhaps you’re a soldier still in a combat zone, I’ll let POTUS’ tweet speak to you –

Others are disabled, collecting SSI, the disability insurance that’s part of the Social Security system. Maybe also withdrawing a bit each year from your retirement accounts but not enough to pay federal tax. You know what? You’re no more dependent on the government that the guy who is getting major surgery courtesy of his health insurer. You paid into the system, this is the nature of insurance, when you are injured, you might need to be on the other side, collecting vs paying in. No issue here.

Grandma and Grandpa – you manage to live off of your Social Security check and a bit of your savings. Like the family of four we started with, your Standard Deduction and Exemptions manage to keep that extra money from getting taxed. You both worked for over 40 years, raised three kids, A Doctor, a Lawyer, and a Graphic Artist, and while you spared them the big student loan bills, You really don’t have much left for the two of you. You paid taxes for 40 years, and you’ve earned a break.

Last, but not least, is the guy with an account that, let’s just say, has a lot of zeros after the one. He’s full up in tax free munis, and laughing all the way to the bank. I suppose the municipal bonds are for a good cause, but with that many zeroes, you’d think that Uncle Sam would get his slice of the pie. I think this guy wants to keep things just the way they are.

  • Elle September 27, 2012, 11:22 am

    This is a really nice piece. Mr. Romney is wrong about the “47%.”

    Still, I think what bothers me about many of the attacks on Mr. Romney is that, at least for recent years, he is paying what the tax code, continued on Mr. Obama’s watch, says he should pay. Romney and his wife give a lot to charity, too. Granted Mr. Romney may have assets hidden away somewhere, but until these and any associated illegalities surface, I do not think bashing Romney for the amount of income tax he has paid in recent years is fair.

  • JOE September 27, 2012, 12:10 pm

    William – Obviously the article is regarding Romney’s comment on the 47%, but it’s not a criticism of Romney, just a look at how the 47% are not bad, not all dependent on anyone. Some are of course, but I try to make the distinction between programs like Social Security (a quasi pension plan) and welfare. The working zero tax folk are still productive members of society.

  • JOE September 27, 2012, 12:15 pm

    Agreed. My issue is not with the 15%, per se, it’s that he hasn’t produced returns that I suspect would expose some questionable tax dodges. This article tried to focus on the 47% themselves. Paying no federal tax is not the same as being a slacker. There are many working 0% folk.

  • William @ Drop Dead Money September 27, 2012, 11:57 am

    What nobody is mentioning is that Mr. Romney’s money has already been taxed a few times before he’s paying tax on it… again. He’s unable to get dividends that haven’t been taxed in the hands of the entity paying. And before the offshore money took a plane it was taxed.

    I have no dog in the hunt, but the focus on Romney’s taxation to me is like getting ready for a first date and worrying about your clothes drawer – it has nothing to do with the event at hand.

  • JOE September 28, 2012, 6:17 pm

    Update – The President’s Twitter account has been sending tweets discussing the 47%, I added his latest, which of course, does refer to Romney.

  • Elle September 29, 2012, 10:30 am

    Good one by the Pres, regarding combat zone soldiers whose pay is not subject to federal income tax. It’s not even an attack per se. It’s get-the-information-out-there, undisputable fact, like the whole piece above.

    Various sites indicate it’s likely Mr. Obama will have an electoral landslide victory. I think Mr. Romney’s 47% remark is contributing mightily to this lead right now.

  • JOE September 29, 2012, 11:00 am

    Elle, thank you again for being one of the regular readers and commenters here.

    I think you are correct, the polls that show percent of voters looks marginal, but when put up as the electoral map, one poll shows we’re at 341 to 197, 270 being the goal.

  • Tahnya Kristina September 29, 2012, 12:47 pm

    Hey Joe, First I just want to thank you for sending me the FinCon badge on Twitter. Second,this is a great post and I am going to link to it on Dinks Finance. I have been watching the elections and I wish I had a vote, but unfortuantely I don’t because I am Canadian. But if I did get a vote it would be for Obama all the way.

  • JOE September 29, 2012, 1:32 pm

    You are most welcome! And thanks for stopping by. The economy and our tax structure is pretty complex, no way to please all. For me, it’s impossible to talk about taxes and not have it spill over to politics. Turns off some readers. Be well, Tahnya, again, thanks!

  • Len Penzo September 29, 2012, 2:02 pm

    Nice piece, Joe … but Romney’s point is simply that the entitlements the federal government is now on the hook for are simply unsustainable and will eventually result in the downfall of our republic. On that point he is 100% correct.

    As for the latest polls … I would take them a big heaping shovelful of salt. Those who believe them are only fooling themselves.

    Check out The American Spectator’s How Carter Beat Reagan.

  • JOE September 29, 2012, 4:10 pm

    You’re too kind. I heard Romney talk with disdain as though the 47% did not include most of the people I referred to. You interpretation may have been his intent, I suppose it’s all in the delivery.

  • Darwin's Money October 2, 2012, 4:40 pm

    A bit one-sided and excludes the massive scam in this country perpetrated by millions of Americans each year. Wonder why the headline unemployment number is so low? When the unemployment checks stop, millions of Americans are just going on disability. They are not disabled. They are scamming you, the taxpayer. This is easily confirmed statistically by looking at the disability rolls since the great recession.

    What Romney said was dumb, since, yes, many of the 47% either don’t have any income, have very little income, or have other reasons why they don’t pay. But 47% is an absurd number you must agree. If 47% isn’t unreasonable, then what is? 60%? 75%? At some point, the absurdity of the situation has to set in on people.

  • JOE October 4, 2012, 2:30 pm

    To assume the worst about the 47% is one-sided. It’s my nature to assume the best, and in this case, I highlighted those who are honest retired folk, or working class people who are not earning enough to pay federal tax. Those who scam the system are another issue of course.

    Income breaks out in a way that there will be earners who are below the cutoff. You can look at this and criticize them for not paying into the system, or you can ask if the system itself is fair. Too far in either direction isn’t good. If the distribution of income created 80% non payers, where do you feel the problem lies?

  • Shellie October 12, 2012, 9:02 am

    I have a question-not at all meant to be judgemental, I actually am uninformed on the topic and want to know your opinion.
    Is the 47% refering to people who pay 0 tax all year, or those who pay 0 at year end?
    My husband and I both work full time and pay tax out of every check. A few thousand dollars by the end of the year. After preparing a return with deductions, we will get a couple hundred dollars back. Are we considered part of the 47% because we had no extra tax bill at year end? There are still thousands of our dollars going into taxes from each paycheck.

  • JOE October 12, 2012, 10:05 am

    Hi Shellie, great question. It’s people who pay no Federal tax for the year. If they paid any, it comes back at tax time. On a standard 1040, it’s the line 61 “this is your total tax.” You are not in the 47% if you just got a refund, but still paid some tax after netting that out.

    I wrote Who Pays No Tax At All? last March, before all the 47% talk started.

    I didn’t take the question as judgmental, even if it were, we all are entitled to our opinions. There are a number of articles discussing the profiles of those who pay no federal tax, and it includes people that by any definition are good working people. These people (for the most part) do pay the Payroll Tax, and some still pay to their state.

  • funancials October 14, 2012, 11:25 am

    Great story here on who the 47% actually are (or might be)…

    A few thoughts to add..
    I’m (for lack of a better word) pissed at both Obama and Romney for this entire election. Pinning the rich against the poor and the poor against the rich isn’t what’s going to get this country headed in the right direction. There are some “rich” Americans that have never worked a day in their life and there are “rich” Americans that worked extremely hard for their riches. At the same time, there are “poor” Americans that have never worked a day in their life and only receive “handouts” and there are “poor” Americans that work extremely hard only to make it by.

    To generalize the “poor” as entitled or the “rich” as uncaring is ridiculous.

    To respond to Darwin’s comment above, I do get frustrated when I see the inefficiencies in disability. My opinion obviously comes only from what I’ve witnessed, and what I’ve witnessed is people taking advantage of the system. People receiving disability that are perfectly capable of working is frustrating.

  • sciliz October 20, 2012, 1:02 pm

    @Darwin’s Money- If you were an employer, are you more likely to hire somebody with partially disabilities (say someone who gets extraordinarily severe migraines, or has had dozens of surgeries and needs more to come), who could work some of the time but not all of the time, when the general unemployment rate is 4%, or when the general unemployment rate is 8%? Employers have more choices when unemployment is high. Ergo, the odds of somebody with partial disabilities actually being able to find work during their functional periods are lower. So there’s a perfectly good explanation, independent from fraud, for the number of people receiving disability SSI to increase when there is a bad recession. Also, most of the people getting on disability are older… it may very well be the case that in the 10-15 years they’d have left in the workforce (based on age to retirement alone), there simply won’t be any jobs available for someone with their skills; which might not have been as certain in better economic times.

    Frankly, I do wish we had a more nuanced system, and great temporary placements for people who can work some of the time, but at some point that costs more to administrate than it saves.

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