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Sen. Marco Rubio, R-Fla., has worked to persuade Republican leaders to expand the child tax credit so the tax overhaul benefits more working families.
To do this, Rubio said he wants to make the credit refundable against payroll taxes. The Republican tax framework proposes increasing the credit from the current amount of $1,000 and raising the current income threshold at which the credit phases out, but does not include plans to make it refundable against payroll taxes.
This means it only affects families with a federal income tax liability, but a good chunk of people don’t pay income taxes because the tax code exempts them.
"We have to make (the child tax credit) refundable against the payroll tax," Rubio said in a Nov. 26 sit-down with CBS4’s Jim DeFede. "Close to half of the voters in America, the only tax they pay is the payroll tax."
Experts have told us that the amount of tax relief working families receive under the plan greatly depends on what happens to the child tax credit. But we wondered about Rubio’s point about payroll taxes. (He said "voters," but we’ll focus on the available data for households.)
Rubio’s exact point is a stretch, but experts said he "has the spirit of the situation right."
"If the senator was trying to emphasize the widespread burden of the payroll tax as a larger component of most families’ tax burdens, he is right about that," said Adam Looney, a senior fellow in economic studies at the Brookings Institution.
For the most part, payroll taxes are one of two things: deductions from an employee’s paycheck, and taxes paid by the employer based on the employee's earnings. The payroll tax is a big money generator for the government and is used for social programs, such as Medicare and Social Security.
We were not able to identify an exact percentage of Americans (or voters) who only pay the payroll tax, and Rubio’s office didn’t provide any evidence to back his specific claim.
We did find one estimate from the Urban Institute-Brookings Institution Tax Policy Center relating to Americans that pay taxes on their income. The center estimated that 44 percent of households paid no federal income tax in 2016. In a subsequent report using the same estimates, the center said about 60 percent of people who paid no income tax still worked and owed payroll taxes.
Based on the center’s estimates, this means about a quarter of all households pay payroll taxes, but not income taxes. That’s half as large as what Rubio said.
So where does Rubio’s factoid come from? Rubio spokeswoman Olivia Perez-Cubas pointed to research from the Peter G. Peterson Foundation that shows the vast majority of workers pay more in payroll taxes than they do income taxes. (The data behind the analysis came from the Tax Policy Center and the Congressional Budget Office.)
Specifically, it found that about 80 percent of American taxpayers pay more in payroll taxes than in individual income taxes. (Keep in mind, though, that the bottom 40 percent of earners pay no individual income tax.)
Len Burman, a Tax Policy Center fellow, said that 76 percent of taxpayers in 2017 owe more payroll taxes than income taxes if you include the employer portion of the tax.
If you only consider the employee portion of the payroll tax, Burman said, 54 percent of households owe more payroll tax than income tax.
Looney also mentioned estimates from the Joint Committee on Taxation, which found that for 65 percent of taxpayers, the payroll tax represents the largest component of their total tax burden.
"The correct observation is that for most people who pay taxes, their payroll tax payments (counting their employers’ payments as their own, which accords with economic theory) are greater than their income tax payments," said Henry Aaron, a Brookings Institution economist.
It’s worth remembering that people pay a lot of other taxes besides income and payroll taxes that contribute to their overall burden to Uncle Sam — there are federal and state excise taxes, state and local sales taxes, and local property taxes.
"Rubio is trying to make a reasonable point that many people try to make, but in doing so, (he) forgets that poor people pay more than just payroll and income taxes," said Joseph J. Thorndike, director of the Tax History Project at the group Tax Analysts.
Rubio said, "Close to half of the voters in America, the only tax they pay is the payroll tax."
Rubio garbled the specific percentage, as the closest estimate we could find shows that about one-quarter of all households in 2016 paid the payroll tax but not the income tax.
However, experts said that the point Rubio was trying to make — that for most people, the burden of the payroll tax exceeds that of the income tax — is correct.
We rate this claim Half True.
Email exchange with Rubio’s spokeswoman Olivia Perez-Cubas, Nov. 27, 2017
Email interview with Henry Aaron, senior fellow at the Brookings Institution, Nov. 27, 2017
Email interview with Adam Looney, senior fellow at the Brookings Institution, Nov. 27, 2017
Email interview with Len Burman, a fellow at the Urban Institute, Nov. 27
Interview, Joseph J. Thorndike, director of the Tax History Project at the group Tax Analysts, Nov. 27, 2017
PolitiFact Florida, Rubio says child tax credit is key in amount of tax relief working families receive, Oct. 19
PolitiFact Florida, Mitt Romney says 47 percent of Americans pay no income tax, Sept. 18, 2012
Urban Institute-Brookings Institution Tax Policy Center, "Tax Units with Zero or Negative Tax Liability, 2011-2026," accessed Nov. 27 2017
Urban Institute-Brookings Institution Tax Policy Center, "Who Doesn't Pay Federal Taxes?" accessed Nov. 27, 2017
Urban Institute-Brookings Institution Tax Policy Center, A Closer Look At Those Who Pay No Income Or Payroll Taxes, July 11, 2016
Urban Institute-Brookings Institution Tax Policy Center, Most Americans Pay More Payroll Tax Than Income Tax, Sep. 6, 2016
IRS, Ten Facts about the Child Tax Credit, accessed Nov. 27
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