Lou Dobbs falsely claimed 40 percent of working Americans “don't pay taxes”

Written by Christine Schwen

Published

While talking about Sen. Barack Obama's tax plan, Lou Dobbs falsely asserted that “just about 40 percent of all Americans -- working Americans -- don't pay taxes.” In fact, all American workers are required to pay taxes on their wages for Social Security and Medicare, and people in the United States are also subject to excise taxes. Indeed, the Congressional Budget Office found that the average effective federal tax rate for households in the lowest quintile of income earners in 2005 was 4.3 percent, while the second lowest quintile paid an average effective rate of 9.9 percent that year.

While talking about Sen. Barack Obama's tax plan on the October 15 edition of CNN's Lou Dobbs Tonight, host Lou Dobbs falsely asserted that “just about 40 percent of all Americans -- working Americans -- don't pay taxes.” In fact, in 2008, American workers who are not self-employed are required to pay 6.2 percent of all of their wages up to a cap of $102,000 and 1.45 percent of their wages for Medicare under the Federal Insurance Contributions Act (FICA). Those who are self-employed are required to pay 12.4 percent of their wages up to the cap for Social Security and 2.9 percent of their wages for Medicare.

Additionally, people in the United States are required to pay federal excise taxes. For instance, everyone who buys gasoline in the United States pays 18.4 cents per gallon of gasoline in federal excise taxes.

Indeed, the Congressional Budget Office's most recent calculation of the effective federal tax rate, which is calculated by combining the effective tax rates of the four largest sources of federal revenues, found that in 2005, households in the lowest quintile of income earners pay an average effective federal tax rate of 4.3 percent. The second lowest quintile paid an average effective federal tax rate of 9.9 percent. The table below illustrates the average effective tax rate by income level:

Federal Tax Rates

From the October 15 edition of CNN's Lou Dobbs Tonight:

DOBBS: One of the tests, it seems to me, of Obama's strength right now was the much-reported encounter with the plumber in the rope line, and the plumber asked him about raising taxes. And Obama acknowledged that he's gonna raise his taxes; that he's going to spread the wealth around through the tax system -- that he believes that that's appropriate. And there's been no impact. Not even a whisper in reaction. It is clear from the Obama tax plan that he is, in point of fact, even though just about 40 percent of all Americans -- working Americans -- don't pay taxes, those folks are going to be getting checks. There's going to be tax credits for a host of issues. None of that is registering with independent voters. Independent voters seem to be buying into that. Is that surprise you?