joshua green

An insult to Reagan’s tax credits

Mitt Romney’s videotaped remark to wealthy supporters that 47 percent of Americans “believe they are entitled to health care, to food, to housing, to you-name it” and that “my job is not to worry about” people who won’t “take personal responsibility and care for their lives” was pretty stunning any way you look at it. It cements the impression of Romney as someone who cares only for the rich. It shows a contempt for others that had previously existed only in Democratic attack ads. It writes off half the nation. And it diminishes and undermines the substantial tradition of conservatives who do care about helping the less fortunate. In this way, Romney’s self-revelation illuminates a troubling shift within the Republican Party that he has now come to embody.

First, some context: It’s true that 47 percent of workers paid no federal income tax in 2010. But Romney is wrong to imply they didn’t pay any taxes. Most paid Social Security, sales, payroll, and property taxes. Many paid a higher percentage of their income than Romney did. The Congressional Budget Office estimates that only about 10 percent paid no federal tax at all, and most of those were retirees.

Regardless, the 47 percent figure has become an angry rallying cry for the sort of aggrieved conservatives who listen to a lot of talk radio.


These parasites and self-anointed “victims,” as Romney sees them, are evidently unworthy of attention or respect, even from a guy willing to cost himself plenty of the latter in his quest for votes.

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An obvious reason why fewer people are paying federal income tax is because so many are unemployed (and not by choice). That will change when the economy recovers. But another big reason is that the income tax has been an important vehicle for the social policies of both parties — including successful, bipartisan efforts to address the very problem of dependency that Romney is griping about in the video.

The best example of this is the Earned Income Tax Credit, an obscure wage subsidy for the working poor created in 1975 by Democratic Senator Russell Long of Louisiana that gained prominence when Ronald Reagan significantly expanded it as part of the 1986 tax reforms. The credit functions as an offset to income tax that is meant to incentivize work. Conservatives liked that the EITC encouraged the poor to lift themselves out of poverty, rather than idly collect welfare. It reflected Reagan’s sunny message of opportunity and empowerment. At the time, The Wall Street Journal called it “the most important anti-poverty measure enacted over the past decade.”

Democrats liked that it helped the poor. Bill Clinton expanded the program again during his presidency, and by the late ’90s it was lifting 4.3 million people a year out of poverty. Today, around 26 million people get EITC benefits.

By design, the expansion of the EITC meant that fewer Americans would pay federal income tax. Given the obvious desirability of having more people working to support themselves, this wasn’t very controversial. In fact, another reason the number fell is that Reagan’s 1986 reforms also raised the standard deductions and personal exemptions so that no family below the poverty line would have to pay federal income tax.


But in the years since, many Republicans have stopped feeling that they have any duty to help those who are struggling. According to the Pew Research Center, 62 percent of Republicans during Reagan’s second term agreed that government has a responsibility to help the less fortunate; today, only 40 percent believe that. Ignoring the benefits of getting people working, many conservatives now cite the growing number of non-income-taxpayers as a justification for saddling them with a larger share of the tax burden (while cutting taxes for themselves).

Stop and think about that for a moment: A Reagan-endorsed program to encourage work and get people off the dole has been recast by Romney as part of a dependency-breeding culture of shiftless moochers. That isn’t just wrong or bad politics. It rejects the basic faith in Americans’ capacity for self-improvement that is supposed to lie at the heart of our national character.

Joshua Green is national correspondent for Bloomberg Businessweek. Follow him on Twitter @JoshuaGreen.