First, is it true that nearly half of US households don't pay income tax?
Mr. Romney's right about the non-income-taxed slice of Americans. It's an issue that conservatives as a whole have been talking about for some time. About 46 percent of US households owed no income tax in 2011, according to an estimate from the Urban Institute-Brookings Tax Policy Center. In 2008 and 2009 – the epicenter of the Great Recession – that figure was even higher, at 51 percent. That last figure hints at one aspect of this number – it's been boosted quite a bit by recent hard economic times. In 2007, the figure was 40 percent, which is closer to its recent historic level.
So who are the 47 percent?
Well, about half of them don't owe income tax for the simple reason that they don't make enough money. A couple with two children with an income of $26,400 had no income tax liability in 2011, because of an $11,600 standard deduction and four exemptions of $3,700 each, according to the Tax Policy Center (TPC).
"The basic structure of the income tax simply exempts subsistence levels of income from tax," wrote TPC's Roberton Williams in an analysis of these figures last year.
The other half of the untaxed (that's equal to about 23 percent of total US households) claims their status because of particular tax breaks. Many of them are seniors who benefit from the exclusion of some Social Security income. The elderly make up about one-fifth of all non-income-tax-payers. The other big chunk is parents who benefit from tax credits for children and the Earned Income Tax Credit (EITC).
Do those breaks have support?
Support for the EITC often splits along party lines, with Democrats pushing for a bigger such refundable tax credit, and Republicans pushing to curb or even eliminate it. But as Keith Hennessey, director of the National Economic Council under President George W. Bush, points out, it is the child tax credit that has driven the increase in the numbers of non-income-tax-payers in recent years, as the value of the credit on a per-child basis has risen rapidly under presidents of both parties.
"Most of the increase since the mid-1990s in the number of people who owe no income taxes is the result of the child tax credit," Mr. Hennessey writes on his personal blog. "This policy was created by Congressional Republicans and expanded with Republicans in the lead."
Is paying no income tax the same thing as paying no federal taxes?
No. Many zero-liability households still ante up for payroll taxes that fund Medicare and Social Security, among other things. According to an analysis from the left-leaning Center on Budget and Policy Priorities (CBPP), even the lowest quintile of US income earners pay about 9 percent of their income to Uncle Sam in payroll tax.
"When all federal, state, and local taxes are taken into account, the bottom fifth of households pays about 16 percent of their incomes in taxes, on average," according to the CBPP.
So does that '47 percent' figure really hold up?
As we've noted above, it is correct that about 47 percent of Americans don't pay income tax. But Romney, in the leaked video, also referred to the "dependency" of this 47 percent on government benefits. There he is on shakier ground.
According to one analysis, only the very broadest definition of Americans "who are dependent upon government" yields a number approaching 47 percent. If Romney is including anyone who receives Social Security and Medicare – both considered an earned entitlement since Americans pay for them – the percentage of Americans receiving money from the government hits 37 percent. That number is from a study of 2010 Census data by Robert Greenstein, executive director of the CBPP.