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50% of Americans Pay No Income Tax

The Associated Press recently ran an article that stated that 47% of Americans will pay no income tax for 2009.  I think most Americans would be fine if those truly living in poverty, 10% of the American households, did not pay any income tax…but that means that 37% of households above the poverty level are paying no income tax.  The article claims that a good chunk are those families who make $50,000 or less, have multiple kids, and other deductions.  I have a hard time believing that these types of families make up 37%.  I know quite a few elderly and young individuals who make less than $50,000, e-file and definitely pay income taxes.  That implies that a good number of wealthy households fall into the non-paying tax bracket.  This might include those families with wealth locked up in businesses where they can shelter income from taxation by deducting “company” expenses.

This seems to be a rather terribly unjust statistic.  If you squeeze the middle and upper-middle class anymore, I would hope that there would be more feedback to our check-writing politicians.   At the very least, why don’t we get a real study of just who is paying taxes in America.  Break the cohorts up by income level and make sure to account for taxes paid on purchases, state taxes, local taxes, property taxes etc.  I think that level of detail should be provided to individuals who work half of the year for our beloved government.

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Posted in Conspiracy, Economics, Politics.

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6 Responses

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  1. scharfy says

    The bottom 50% of earners don’t pay a ton in federal income tax. This much is true. But that’s only a part of the total tax burden picture.

    The working poor get hit in payroll taxes (which cap out well above their earning), inflation, sales taxes ( 10 percent in my area – and if you spend every thing you make – thats 10 percent more in taxes).

    In short, if you spend a large% of your disposable income, which many of the poor have to do to survive, consumption related expenses create a larger component of your total tax liability than do federal income taxes. ( and of course payroll, state, etc…)

  2. SurlyTrader says

    I agree with your statements, but I guess I just do not understand why we are not entitled to know exactly who is paying what as a percentage of income. It seems that this would be a very easy set of statistics for the IRS to put together. I have a very strong feeling that the government does not want us to know and it is not out of fear of us seeing that the poor are not paying taxes or receiving money, but because of the vast inequality between the mega-rich and the middle and upper middle class

  3. scharfy says

    I guess I see your point. But I don’t see capturing the totality of tax liability for the mega-rich as simple.

    E.G. – Analyzing someone who has 50 million invested in triple tax free munis, another 10 million of earned income, 25 million in capital gains, lives in a 4 million dollar home and spends 2 million a year from an overseas trust (but expenses much of it)- capturing that total tax liability does not seem easy to me.

    Posing that against someone who W2’s $50,000 and what they pay out – in total -would give a more accurate picture of actual progressiveness (or regressiveness) of the tax curve.

    But again, the super wealthy have a lot of moving parts compared to W2 wage earners.

    But I TOTALLY agree that the middle and upper middle class probably, when you actually do the math, get hit the hardest – by any metric.

    This is a good topic, but is wrought with political implications that make honest analysis difficult and unwanted by many.

  4. Stingy Saver says

    I saw this article posted on Yahoo Finance yesterday which I think puts some good perspective on this post and the conversation above. I thought the more interesting comment from the article was the following:

    “There is no question that the wealthy pay a higher overall tax rate than any other group. That is an American tradition. But there is also no question that their tax rates have fallen more than any other group’s over the last three decades. The only reason they are paying more taxes than in the past is that their pretax incomes have risen so rapidly — which hardly seems a great rationale for a further tax cut.”

    I’m not sure I’m quite ready to shed a tear for the wealthy but I think this is something to be cognizant of in the future.

  5. SurlyTrader says

    I never really care to make comments about the amount of taxes paid by the rich, I would much prefer to see stats that break out the percentage of total income paid in taxes. My theory is that the super-rich pay very little taxes while those making anywhere from $75k-$250k face the brunt of it. I think the IRS owes it to us to tell us exactly how much each group is paying and I want all dividends, corporate profits etc taken into account. Just because one person can make deductions and another cannot, does not mean that it should not be counted as income.

    Peter Schiff might go off the deep end every once in a while, but I liked his recent comment: “This year Americans will pay more in taxes than they will for food, clothing and housing combined!! And for every dollar we pay the government in federal taxes, Washington spends $1.60. Who pays the difference? I will give you one guess… Us!

  6. Stingy Saver says

    I think it goes back to what you hit in a lot of your posts: transparency. Something we could use a lot more of in a lot more places.

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