Blog of the Century

Graph: The Submerged State

Blog Post by: Benjamin Landy, on September 26, 2012

When Mitt Romney dismissed "the 47 percent" of Americans who don't pay federal income tax as "victims" and "dependent on government," he revealed an ideological worldview that fundamentally misunderstands the way the U.S. government uses the tax code and social programs to redistribute wealth. "The reality he glossed over is that nearly all Americans have used government social policies at some point in their lives," writes TCF Fellow Suzanne Mettler in Monday's New York Times. "The beneficiaries include the rich and the poor, Democrats and Republicans. Almost everyone is both a maker and a taker."

According to Mettler's research, 96 percent of Americans have at one time or another relied on the federal government, whether through social insurance like Medicare, programs that assist low-income families like food stamps or "submerged" benefits like the mortgage interest deduction, which are hidden in the tax code. "On average, people reported that they had used five social policies at some point in their lives [...] two direct social benefits in the form of checks, goods or services paid for by government" and "three policies in which government’s role was 'submerged.'" Still, many beneficiaries, particularly conservatives and people with high incomes, responded that they "have never used a government social program."

Part of the reason for this idiosyncrasy is that households with income above $150,000 take advantage of benefits hidden in the tax code (examples include the first six categories in the graph above) at three times the rate of households with income under $10,000. According to Mettler, the submersion of government benefits—like the tax-free status of the employer contribution to employees' health insurance, or the carried-interest deduction that allows hedge fund and private equity managers to pay a 15 percent tax rate—"camouflages the fact that they are social benefits, too, just like the direct benefits that help Americans pay for housing, health care, retirement and college."

The only difference between these benefits is their visibility and the extent to which society stigmatizes or celebrates them. That distinction is wasted on Mitt Romney, a quarter-billionaire who does not see the irony of attacking "the 47 percent" while paying a lower tax rate than most middle-class families.