One of the loudest critics of the recent wave of corporate inversions is University of Southern California law professor Ed Kleinbard, who warns that these transactions will erode the U.S. corporate tax base because...
- Fox News quotes Will McBride on Fiscal Illusion
Fox News quotes Will McBride on Fiscal Illusion
As debate rages on over the impact of Mitt Romney's remarks on the "47 percent" of Americans who don't pay federal income tax, little attention has been paid to the fiscal impact of a similar group -- the 58 million Americans who are actually collecting more in benefits from the government than they pay in taxes.
Close to half the population now pays no federal income tax, as Romney said in his hidden-camera remarks that have caused such consternation.
Some of those, of course, are retired Americans collecting Social Security and Medicare. But a recent Tax Foundation study that excluded that group found the percentage of non-taxpayers has risen from 21 percent in 1990 to 42 percent today. And government spending has grown along with that.
Analysts now fret that the growing number of people not paying into the system is encouraging that government bloat.
"You disconnect people from the cost of government and they'll suddenly have a much bigger appetite for government spending," said Will McBride, chief economist at the Tax Foundation.
Kevin Hassett, director of economic policy studies at the American Enterprise Institute, said that "as more and more Americans don't pay taxes, then there's less resistance to programs that take money from everybody else."
Further, the Tax Foundation estimates that the doubling of the non-taxpayer ranks is associated with more than $200 billion in entitlement spending. The foundation estimated the cost was $213 billion in 2010, transferred to those 58 million.
"So it is a big chunk of change, it's a big part of the federal budget," McBride said.
Over 20 years, the study found that the number of non-taxpayers has increased the debt-to-GDP ratio by 14 points, which slows down the economy.
Those who pay no federal income taxes do pay many other taxes.
But Hassett claimed there is a "scientific link" between the rise in Americans who are not paying income tax and the "explosion" in the size of government.
Romney was apparently speaking to that concern when he talked about Americans living off entitlements during a private meeting with donors earlier this year. Romney, though, stirred controversy with the language he used -- he said they believe they are "victims" and at one point suggested he didn't have to worry about them because they'll vote for President Obama no matter what.
Romney has since said his campaign is about the "100 percent."
Running mate Paul Ryan and others are adjusting the Romney message, saying many of the 47 percent not paying taxes are there not because they want to be but because Obama's policies have left them no choice.
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- IRS income data is collected in order to raise revenue as directed by Congress, which means it is not necessarily well-suited for other purposes, like measuring equality in our society.
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