In National Review, Ramesh Ponnuru takes on the “Freeloader Myth,” namely, the increasingly prevalent worry that half of all workers “pay no taxes.” It’s a meme that Michele Bachman, prominently among others, has helped perpetuate.
Ponnuru explains that 47 percent of workers paid no income taxes in the latest period. Most of them, though, did pay payroll taxes — the contributions to Social Security and Medicare automatically deducted from every worker’s paycheck. And many of them would have paid income taxes if not for a number of factors, including the recession, the Bush tax cuts, the Gingrich expansion of child credits, and more — read Ponnuru’s piece for a complete rundown. There’s no conspiracy here, nor any looming tipping point at which the “takers” outnumber the “producers” and vote themselves even bigger handouts.
Ponnuru also makes an important point about payroll taxes:
How to count payroll taxes is a disputed subject. Many conservatives argue that since payroll taxes are dedicated to Medicare and Social Security, people who pay only payroll taxes are contributing to their retirements but not to the general operations of the government. The irony here is that FDR deliberately and explicitly introduced the payroll tax to accompany Social Security because it would encourage people to draw this false connection. In reality, the relationship between payroll taxes sent to Washington and Social Security benefits sent back is loose: Today’s beneficiaries get much more than they sent, and tomorrow’s will get less. (In the case of Medicare, there is no relationship.)
The point of the payroll tax, for FDR, was to ensure that “no damn politician” could ever take away the benefits because (to paraphrase conservative author William Voegeli) all the damn voters would think they had earned those benefits through their payroll taxes. All federal taxes go to the federal government, and all federal spending comes from it: The rest is accounting, and accounting tricks. People who pay payroll taxes are funding the federal government, and conservatives who deny it are falling for a trap FDR set for them.
I’d add that there’s a certain tension between regarding Social Security as a “monstrous lie” and also discounting the payroll taxes paid by people lower on the income tax brackets. If Social Security’s future benefits are a lie, then where are today’s payments going?
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