Truth About the 47 Percent

[Ed Hudgins]

Truth About The 47 Percent

By Edward Hudgins

October 29, 2012—Team Obama continues to hit Mitt Romney with ads concerning his “47 percent” remarks. It’s time to cut through the fog of the campaign and to clarify the truth and implications concerning this controversy.

Let’s start with Romney’s remarks in what he assumed was an off-the-record meeting with supporters: “There are 47 percent of the people who will vote for the president no matter what.… who are dependent upon government, who believe that they are victims, who believe that government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you name it. That that's an entitlement. And the government should give it to them.”

Who takes?

We indeed see an emerging dependent class in America. Specifically, the country is dividing into to two classes, the producers and those dependent on wealth transferred from producers by government expropriators.

Some 49 percent of Americans live in households in which someone receives a direct federal payment, up from less than one-third of households in the early 1980s. A quarter of households receive some sort of poverty benefit; for example, some 46 million Americans now receive Food Stamps. Retirees receiving Social Security and Medicare account for about half of that 49 percent.

Who Pays?

So who foots the bill for these benefits? Only about 2.3 percent of the total income taxes received by the federal government are paid by the bottom 50 percent of income earners filing tax returns—some 69 million. The top 10 percent of earners filing—13.8 million—pay over 70 percent of those taxes. The top 1 percent of earners filing—1.4 million—pay 37 percent of those taxes.

The average federal income tax rate paid by the bottom 50 percent with positive adjusted gross income is only 1.9 percent, while the rate for the top 10 percent is 18 percent and for the top 1 percent it is 24 percent.

Of course, income taxes only constitute about one-quarter of all taxes collected. Add Social Security taxes, corporate taxes, state and local income, sales, property and other taxes and the situation is less skewed. But the most prosperous still pay the largest share, both in total taxes and taxes as a percentage of income.

Who earns?

The best way to understand the dangerous implications of these numbers for the country is to dissect the demagogy of a Democratic campaign ad: “Victims. Dependent. That’s what Mitt Romney called 47 percent of American, including people on Medicare. …. You’re no victim. You earned your benefits. Don’t let Mitt Romney take them away.”

This ad, which doesn’t question the 47 percent number, is disingenuous first with its slick argument that “You earned your benefits.” Certainly military personnel and veterans have earned their taxpayer funds benefits by defending the country. And judges and other people performing legitimate government functions certainly earned their pensions as compensation for their services.

By contrast, consider the largest government entitlement program, Social Security, and how applying the term “earn” to recipients in the program is misleading and obscures important facts about the defects of the system. First, the government takes our money in the form of payroll taxes whether we like it or not. We don’t have a choice. We are not given the freedom to earn our retirement nest-egg through our own efforts. We are dependent on the government for a large share of our retirement—as well as healthcare and much else.

Second, the government does not “earn” money for retirees by investing those extorted funds in productive enterprises. Rather, this pay-as-you-go system in fact is a Ponzi scheme. The money put in by current beneficiaries has already been spent and future retirees are footing the current bills.

Third, while we’re “entitled” to receive our own money back upon retirement, it’s at a pathetically poor rate of return. Anyone investing the same money over a 40 year working lifetime in a conservative diversified portfolio would receive two to three times the return as with Social Security.

The government limits what we might otherwise earn if we were free to invest our money in productive ventures rather than be forced into government transfer schemes. The Social Security system makes us victims of a government by limiting our autonomy. We are, as Romney suggests, dependents.

Who loves dependence?

And here’s the most dishonest Democrat criticism of the Romney remarks. The entire political agenda of leftists like Obama is to expand entitlements which, by definition, make individuals more dependent on government. That’s what Obamacare is. Government favors and largess determine who gets what, and political power is the coin of the realm.

But Romney is also wrong. While he’s right that those dependent on government have a strong incentive to support politically those who will give them more, he is wrong to think that all of those individuals are happy in their servitude. Indeed, Romney has “walked back” his statement and says he’ll be the president of 100 percent of the people.

But he should argue clearly that individuals should be responsible for their own lives and well-being and that the government programs are the principal reasons they cannot be. He should argue that dependence on government is morally debilitating, by telling people they have a “right” to that which they did not earn. He should argue that we are all better than this, that we should resist the vile addiction sold to us by politicians of all stripes.

Romney has made some of these arguments but many of his policy prescriptions, while better than the Democrats’, still don’t reject the premise of government as the ultimate nanny in a nanny state.

Let’s hope that those this debate over the 47 percent continues so that the implications become clear. Politicians and citizens alike should have to choose between a society of freedom and personal responsibility and one of servitude and dependence.

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Hudgins is director of advocacy for The Atlas Society.

For further reading:

*Edward Hudgins, “Producers vs. Expropriators: America's Coming Civil War.” April 13, 2012.

*Edward Hudgins, “The Servile Citizen.” Summer 2009.

*David Kelley, “Obama’s Era of Responsibility.” Summer 2009.

[PDS]

Ed:

I suspect most of the dreaded "1%" pay roughly 40% of each dollar earned in federal, state, and local taxes.

This does not include, of course, sales taxes, airline taxes, and assorted other gimmicks our overlords have conjured up.