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  • Morning Bell: Government Dependency Rises As Number of Taxpayers Declines

    The leak of a video featuring former Governor Mitt Romney (R-MA) has sparked debate about government dependency and the number of people in the United States who do not pay federal income tax.

    In the video, Romney refers to “47 percent” of Americans and says that they are “dependent upon government” and “pay no income tax.” While these groups are not necessarily one in the same, there is overlap between the two, and the percentages on government dependency and non-tax-paying are very similar.

    It is true that nearly half of all tax filers—those who are filing an income form with the IRS—pay no federal income tax. It’s also true that millions of Americans receive direct government support in a host of ways, including income, food, housing, medical care, school lunches, and more.

    In 2009, 47 percent of all tax filers paid no federal individual income taxes, and in 2011 that figure was 46 percent. This raises a crucial question, as Heritage’s Alison Fraser points out: “Should nearly 50 percent of Americans really be exempt from funding the most basic constitutional functions of government—along with education, food stamps, energy, welfare, foreign aid, veterans’ benefits, housing, and so forth?”

    It stands to reason that those who have skin in the game—who are helping to pay for all of the government programs—will be more concerned about reining in out-of-control government spending, because they see their taxes going up and the country’s credit rating going down.

    On the other hand, if you are on the receiving end of government benefits, that is likely to color your perception of how taxpayers’ money should be spent. According to the Heritage Foundation’s 2012 Index of Dependence on Government, 63.7 million Americans, or about one in five, is receiving direct government support from Social Security, welfare, or Pell Grants—and that is at its highest level ever. (continues below chart)

    These individuals are very likely to be receiving additional benefits from other government programs such as Medicare or Medicaid, food stamps, etc., and the total share of Americans receiving benefits is likely to be even higher when considering benefits available on everything from housing to school lunches. The Wall Street Journal found that in 2011, 49 percent of Americans lived in a household where at least one member of the family received a government benefit.

    Heritage has been publishing the Index of Dependence on Government for the past 10 years, and the Center for Data Analysis offered a preview yesterday of what next year’s report will look like, as it updates with the most recent data becoming available for 2011.

    The outlook is grim: Government dependency is jumping for the fourth year in a row, and the Index has risen more than 31 percent in that time.

    This is bad news for three reasons. First, the economy is so weak that people are going to the government for help. This is a stark repudiation of President Obama’s big-spending, “spread the wealth around” approach, because “giving everyone a shot” does not work unless the “shot” comes at the expense of the taxpayers.

    Second, the nation can’t afford to continue increasing spending on these programs, as President Obama has proposed in each of his budgets. Federal spending is exploding—and it is already an eye-popping reality that 70.5 percent of federal spending goes to dependency-creating programs. We are spending more on dependency-creating programs while an ever-shrinking number of taxpayers are paying for them.

    But third, and most importantly, it’s bad for Americans. The American Dream is about life, liberty, and the pursuit of happiness, through independence—not dependence on government. Government dependency erodes human dignity and civil society.

    These programs were originally designed to help those who fall on hard times and need a safety net. Public policy should head back in that direction. The welfare reform of 1996 helped lift recipients out of poverty and back into jobs by requiring, among other things, that they work. President Obama has undone that requirement. And there are dozens more anti-poverty programs that should be revamped to help those who are able toward self-sufficiency.

    At the same time, we must address the looming entitlements crisis: 78 million baby boomers are heading into retirement, and many of them will be entirely dependent on Social Security and Medicare for their income and health care. This dependency is a huge driver of future budget deficits.

    We cannot continue on a course of unlimited government spending when fewer and fewer taxpayers are paying for that spending. That is the financial fact. But we also cannot sustain the American Dream on this course—and that is a fact that is intensely personal for every American.

    Quick Hits:

    • According to a new report, after the Obama Administration suspended the work requirement that had been tied to food stamps, the number of able-bodied people on food stamps doubled.
    • President Obama told late-night host David Letterman that we don’t have to worry about the debt and deficit “short term,” though they are “long-term” and “medium-term” problems.
    • France is closing 20 of its embassies around the world after a French magazine published cartoons of the prophet Mohammed.
    • Chicago students will return to school today after the teachers union finally ended its strike last night. Reuters reports that the union “fought off [Mayor Rahm] Emanuel’s attempt to link pay to merit.”
    • A new Heritage study reveals that government employees work roughly one month less per year than private-sector workers.
    Posted in Economics [slideshow_deploy]

    42 Responses to Morning Bell: Government Dependency Rises As Number of Taxpayers Declines

    1. Ted Pruitt says:

      I agree with the premise of your article, but they need to take people on social security and medicare out of the equation, because in general they have paid into the system over their livetimes and are entitled to those benefits. It is the ones on welfare and government subsidies that are putting a drain on the system. This also includes illegal immigrants that work off the books, pay no taxes and benefit from the system, such as not having insurance and going to the emergency room and putting their children in school. We need a serious overhaul of our system! People come here from all over the world, both legally and illegally, and abusing all of the benefits that our government has put into place. Benefits which we simply can not afford!

      • Thank you Ted, For a long time journalists have equated welfare, disability. social security, and medicare as equal, more or less ALL welfare. I have worked for 50 years, paying into social security and medicare all that time. Welfare recipients pay for nothing, money, housing, clothing, food, health care, child care. There is a difference and if congress hadn't stolen and spent the social security trust fund there would be plenty of money to pay benefits. Ww seniors built that ourselves.

      • Tim M. says:

        Social Security and Medicare should be included because if you add up all the money contributed by any one individual it is far smaller that what the same individual takes out of the system. This is the fault of politicians on both sides and in part to a self-denial of the individual who does not want to believe that he cannot get something for nothing. Social Security was based on paying out to individual at 65 years old when the average person at the time died at 63 years old. That fact and the greater number of workers compared to the number receiving benefits made the program actuarially sound. And no one could have predicted how Medicare and medical costs in general have exploded. To keep these programs going politicians would have to raise taxes or cut benefits. Both are unpopular ideas to politicians and to the citizens. The sad fact is that both programs are transfer payment from the young to the old at a time when the young are getting lower waged jobs, if they get a job at all.

    2. Henry says:

      It needs to be pointed out that Social Security is, for those who paid into it and their employers, an annuity contract that should be fully funded. The problem is the government has actually confiscated those payments and now deems them as "entitlements" instead of what they are coupled with this is the wide use of Social Security for other purposes which really are transfer payments. It is a shame that a young person whose "disabilty" is drug dependency or an recent immigrant (legal or not) will receive more in benefits without having paid into the system than grandpa and grandma who worked for 40 years or more.

    3. Kathy says:

      Great article. My comment is about Social Security. It is an "entitlement" in that people on Social Security feel entitled to a return of their life-long contributions but it should not be construed as an dependency program because most Social Security recipients are getting back what they contributed. If the system were run correctly (ha), then they would be getting their deposits plus gain and that should be enough to sustain them for a good amount of time.

    4. Act Responsibly says:

      I think it would be incorrect to assume the current taxpayers will continue to work hard and pay increased taxes while a significant number of citizens receive increasing unearned entitlements and government handouts. Our politicians need to be prepared for a backlash where current taxpayers lower their income,increase deductions to lower their taxable income and adjust by lowering their spending. Unfortunately, this backlash will destroy the economy and our government. This is a serious situation that needs to be intelligently discussed.

    5. John Abbamondi says:

      I think its important in this debate to differentiate between government payments that were earned such as government retirements, social security & medicare and those that were not earned such as welfare.

    6. Herb Eaenest says:

      Are Social Security and Medicare really entitlements ? It seems to me that since ( I am now 81 years old) I have paid into the Social Security my entire working life time and paid into Medicare since 1965, that these two programs are the payout for these two "Insurance" programs. I had no choice in this matter – I just paid. These programs should not be lumped with the other welfare programs, food stamps, rent subsudies, etc which are Government give aways.

      • Peter says:

        Herb, I am 52 and very conservative. I also agree with you whole heartedly. You did your work, paid your dues and surely do have an insurance contract for benefits that you are owed 100%. I for one am happy to honor that promise, and ask our politicians to fix the system so it is viable for my kids and grandkids while protecting you.

      • Bobbie says:

        What's in the hands of the government is beyond our control. We all understood the ones who pay in are the ones entitled but within the control of government eligibility was "changed" behind America's back. Whoever the "government deems entitled" consists of massively more (less the expense) than the ones who pay in. The ones who've been and who are paying in get the raw end of the stick so everyone else can have personal, cultural, preferential treatment that should be privately expensed! Horse therapy, etc! If government gave basic care to all it there wouldn't be a magnitude of costs, but this president clearly has no concern for Americans so he's using our principles and values to mock in favor of his own.

    7. actresponsibly says:

      I think it is wrong to assume the current taxpayers will pay higher taxes if the rates increase. My bet is that a number will slow down their work, take more deductions and lower spending, rather than supporting increased unearned entitlements and higher government handouts. The administration needs to develop a plan to deal with less revenue and an economy with lower spending.

    8. Ken Kok says:

      I resent being classed as dependent on government because I collect Social Security and Medicare. Ipaid into Social Security for more than 50 years and into Medicare since it stared. All retirement planning included those sources. I also pay significant personal income tax. We all pay into the federal tax system indirectly when we purchase goods from companies that pay taxes.

    9. Gary Staton says:

      Well said Gov Romney. The big issue is when the current administration has relabeled Social Security benefits as Federal Benefits. In essence Social Secutrity is a payback of all the years the senior citizens contributed to the program. I satrted working and contributuing in 1956 and have paid in to the fund as recent as 2012. My military pension for 21 years servcie is also labeled Federal benefit. The problem s when one speaks of federal benefits there is much differance between handouts and earned benefits. A program loved by those collecting but a big burden is Earned Income Tax Ctredits (EITC). This rewards lower middle class with children with a gift of money of up to $5500. and child tax credits of $1500. per child. Nice to recieve but hardly fair programs for taxpayers. The EITC is not indexed so in small midwestern towns many people with good jobs still qualify. I hope the Governor can clarify his message but I see those on the dole going against him. Dont bite the hand that feeds you and rewards non productivity.

    10. Scary times in America.

    11. S French says:

      Is it true low income people on government programs can get free cell phones with data programs??

      • michaeljbeglinjr says:

        Yes it is. It is a program called LifeLink, and Obama has personally endorsed it. The sad part is that if you get someone else to join the LifeLink program, the government will reward you with extra time on your phone. This program is paid for by raising the phone bills of people that have regular house phones. My useless sister-in-law is on LifeLink. She is also the same person that has filed a false income tax report for the past eight years. I tried to report her to the IRS, but you would not believe the paperwork they want me to fill out. Instead of investigating her themselves, they want me to give them her Social Security number, how much she got in false claims, everything. It seems as if trying to do the right thing is no longer politically correct. Our system is badly broken, and in desperate need of repair.

    12. Paul says:

      You talk of Social Security and Medicare as if they are a government dependency program. I was "forced" to pay into the SS system for near 50 years, and am now collecting in the hopes of living long enough to recoup my forced "investment". I am not dependent on the government, who turned the SS pyramid scheme into a ponzi scheme. I just want MY money back. Medicare- I am not dependent on the government for my medical care. Because I am trying to get my SS "investment" back I was "forced" to give up my quality insurance plan and enroll in Medicare. All of this government interference in our lives may be about creating dependency and having control, but people left alone will take care of themselves. Two of the best things we could do for this country are to eliminate the Social Security and Medicare programs.

    13. Ben C. says:

      It seems to me that Congress creates its own job security by enacting well intentioned legislastion then spending years enacting legislation to fix the unintened consequences – with bilateral partisian finger pointing. The more Congress legislates the deeper the abyss. I think Cicero said it best: "The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance." – Marcus Tullius Cicero (106-43 B.C.).

    14. OipeO says:

      Evidently at least half the voting population, who will vote for Obama again, finds no problem in this situation. I don't understand how honest Americans don't turn away in droves after President Obama's 'sharing-the-wealth' comment, the Life of Julia campaign, the Health Care Reform Act, and the 'you-didn't-build-that' comment. The 'Forward' tag line is a joke and people eat it up with a spoon. 'Forward' for him is the way of Greece, Spain, Italy, France, the old eastern block of Europe, the old Soviet Union. I guess the constant drip of media and education over a person's life has worked. We are brainwashed to love centralized government regardless of all the examples throughout history and currently that the liberal agenda doesn't work.

      • michaeljbeglinjr says:

        I know a lot of young people, and they are much more politically knowledgeable than my generation was at their age. Most of them just want a decent job, so they can buy a car and get their own house. I have more faith in the upcoming generation than I do in the ones that let this mess happen. I am constantly amazed at how many complain about the government, yet never take the time to vote. I think a lot of those that voted for Obama during the last election will not vote for him this time. He has lied to too many people about too many things. Even my daughter in high school knows this. Don't give up hope yet. Peace.

    15. Joe Ihle says:

      I totally agree. However, you need to take the people drawing social security checks (which they have paid for) out of this equation. These are not welfare checks.

      • michaeljbeglinjr says:

        Indeed they are not. Everyone that has paid into Social Security is most definitely entitled to get their money back. If our Congress had left that money alone, there would be no problems with the Social Security program today. They have stolen from us, and now try to make us feel bad when we want our money back. That's not right.

    16. Wally says:

      I take exception to including Social Security and Medicare recipients with welfare and Medicaid. I have paid into both SS and medicare for many years and if our wonderful government elite would have left it alone, it would have been there to pay out during my retirement. Please differentiate between them.

    17. Bob C says:

      Social Security payments and Medicare are not entitlements. They are insurance policies that were, and still are, being paid by the American public. The social security plan was orriginally passes by the FDR administration as the Social Security Insurance act. Today's seniors did not have the option to not pay into this system, but were mandated by the government to make these payments based upon their earnings. If you were self employed, you had to double the amount for the employer portion of the payment. Please do not tell me that I did not build my business and that I am collecting a federal hand-out based on my procuring an insurance policy that I was forced to purchase. Also, I am still paying for my medicare insurance – every month a premium is deducted from my SSI payment.

    18. Gil says:

      Let's not be so quick to list Social Security in with everything else. I did not have the choice of where to put the many thousands of dollars I paid and still pay into that system. I will never get back half of what I paid in, even if I live to be 110. On the other hand, if I'm on welfare I might not pay any taxes, but I am getting benefits even if I never paid s dime into the system.

    19. Glen says:

      Obama's policies have failed. No further comment is necessary.

    20. Arthur McLean says:

      I read today that within that 76 million that pay zero federal income tax are included 4000 tax filers with incomes in excess of $1million. Democrats will seize on this to point out how the "rich" are getting away with not paying their "fair share". In reality it is the tax code, with allowances for capital gains losses, foreign tax credits, dividend income, charitable donations, etc. that allows this.
      The "Fair Tax" , a national consumption tax, would fix this perceived inequity. Yet I have seen no discussion of the merits or drawbacks of the Fair Tax by Heritage. Why is this?

    21. As always Heritage is right on top! Thank you and continue on… everyone needs to join this group.

    22. David Tuttle says:

      While I totally agree that entitlements are out of control, I struggle with including my social security as a handout. I worked and contributed to SS for over 48 years. There is no way that I could subsist on SS payments, but fortunately I do have an IRA, (rolled over from my 401k), that allows my wife and I to get by. I do pay taxes on my annual IRA withdrawl. I am a strong Conservative and support the Romney/Ryan ticket. I believe it would be appropiate for the campaign to clarify that many in the 49% are retirees that are not seeking handouts. We paid into these programs. Most of us do agree that some modifications need to be made ie. moving retirement age gradually to 70, and a number of changes to both programs to make them sustainable. There are also Republicans and Independents, that work hard but are not high wage earners, and therefore pay little or no income tax, while still contributing through a variety of other taxes. A large number of these Americans, are not among the takers.

    23. Good article but no comment about how this affects tax rates on the remaining 50% of the public who do pay Federal taxes. Those receiving government "entitlements are far more likely to vote for a candidate who wants to raise taxes on those who pay because it supplies their "habit".

    24. I heard a quote last night "redistribution = retribution". Go see "2016" and you'll know what I mean! If you don't pay any taxes, why would you worry about getting someone in office that will cut taxes and reign in spending, and in fact wouldn't you want to elect someone that keeps the gravy train rolling? Obviously, we're running out of taxpayers to fund the gravy train, and I'm super-worried that there are more of "them" than "us" at this point. Scary times….

    25. @chrizzy100 says:

      trouble is the Government is not putting away money for your Social Security and Medicare you are paying for other peoples in the hope that others can do the same for you…its not your money your money is long gone..you are living off the taxes of the next generation

    26. Kelly Croftan says:

      I think its a wrong way to assume that the current tax payers will pay more taxes, when prices increases. They must make sure that all the persons to pay the tax, instead of collecting more taxes from the current tax payers.

    27. ty brown says:

      Yes those of us who paid into Social security et al, and continue to pay for Medicare and pay taxes on SS, were never required by Congress to increase our payments as benefits were increased or as the demographics adversely affected "contributions " to these plans. Those of us who are members of the "greatest generation" should realize (be means tested) and be prepared to make another "contribution" to prevent the financial collapse of the country along with other realistic reforms that Paul Ryan is recommending. It would be helpful to elect a truly conservative congress that knows some basic economics which has not been taught in our schools for over 40 years apparently.

    28. David says:

      Diito on all SS and MC comment. Also, militray retirement is earned, not a government support program.


    29. tom blomstrom says:

      If one doesn't contribute to the coffers to pay for the party they shouldn't be allowed to attend. Only those who pay taxes should be allowed to vote. No taxes paid, no vote.

    30. Guest says:

      Social Security is now a PONZI scheme: where current workers pay the benefits of retirees until death.
      It is a FAILED socialsit policy. t's only hope of survival is that there are enough workers to pay for the baby-boomers and beyond in perpetuity.

      Social Security does not provide a separate account for each taxpayer in reality: It's all just accounting gimmicks and a poltical facade. Any "extra" FICA taxes beyond paying the current benefits payout has been "invested" in US Tresury bonds and the money is essentially used to pay for the general Federal spending. (deficits) Current taxpayers pay the interest due on the bonds. and pay the proceeds of the bonds. So, again current taxpayers pay for the benefits of current retirees through income taxes or FICA taxes.

      Social Security is no longer insurance just for those that need assistance. It's an entitlement benefit based on age only with payouts to death. It is no longer a safety net for the few, but a need for the majority. True insurance would mean some receive benefits and some don't receive benefits like life, home, and auto insurance, but everyone is entitled to SS.

    31. O2BMe says:

      Yes we should deduct social security and medicare from that number, but it is true that there are too many on welfare and Medicaid. When there are more on welfare than working and paying taxes the system won't work. Welfare is supposed to be a helping hand until you can find a job. Disability should not be out of social security because some of the people on disability have never been able to work and thus never paid into social security.

    32. Emcee says:

      I just find it flabbergasting to see so much of my hard-earned income go to tax then for someone to suggest that retirement age should be increased to seventy, and with no assurance that I will still have a share of the pot I contributed in because it's being devoured while my generation is trying to fill it… and what's sad is that without reform this will be a continous cycle with even my future children paying off for what I will eventually feel as my "entitlement" over social security.

    33. Bruce says:

      My wife and I are retired and we each receive SS in addition to our pensions. I would have preferred to have been able to take my share of FICA and a portion of my employer's share and invest it in my 401K plan and forego social security. Unfortunately, the statists prefer to have their "subjects" dependent on the state.

      The founding fathers understood the danger of people being able to vote themselves benefits, either directly or through their politicians. Very sad.

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