Half of US pays no federal income tax

[ivanm]

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This article was on my home page this morning, msnbc.com. I haven't been able to copy in the second
page of the article.   

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Half of U.S. pays no federal income tax
Credits for low- and middle-income families exempt many
By Stephen Ohlemacher

updated 4:36 p.m. CT, Wed., April 7, 2010
WASHINGTON - Tax Day is a dreaded deadline for millions, but for nearly half of U.S. households it's simply somebody else's problem.

About 47 percent will pay no federal income taxes at all for 2009. Either their incomes were too low, or they qualified for enough credits, deductions and exemptions to eliminate their liability. That's according to projections by the Tax Policy Center, a Washington research organization.

Most people still are required to file returns by the April 15 deadline. The penalty for skipping it is limited to the amount of taxes owed, but it's still almost always better to file: That's the only way to get a refund of all the income taxes withheld by employers.

In recent years, credits for low- and middle-income families have grown so much that a family of four making as much as $50,000 will owe no federal income tax for 2009, as long as there are two children younger than 17, according to a separate analysis by the consulting firm Deloitte Tax.

Tax cuts enacted in the past decade have been generous to wealthy taxpayers, too, making them a target for President Barack Obama and Democrats in Congress. Less noticed were tax cuts for low- and middle-income families, which were expanded when Obama signed the massive economic recovery package last year.

The result is a tax system that exempts almost half the country from paying for programs that benefit everyone, including national defense, public safety, infrastructure and education. It is a system in which the top 10 percent of earners — households making an average of $366,400 in 2006 — paid about 73 percent of the income taxes collected by the federal government.

The bottom 40 percent, on average, make a profit from the federal income tax, meaning they get more money in tax credits than they would otherwise owe in taxes. For those people, the government sends them a payment.

 
"We have 50 percent of people who are getting something for nothing," said Curtis Dubay, senior tax policy analyst at the Heritage Foundation.

Tax aversion
The vast majority of people who escape federal income taxes still pay other taxes, including federal payroll taxes that fund Social Security and Medicare, and excise taxes on gasoline, aviation, alcohol and cigarettes. Many also pay state or local taxes on sales, income and property.

That helps explain the country's aversion to taxes, said Clint Stretch, a tax policy expert Deloitte Tax. He said many people simply look at the difference between their gross pay and their take-home pay and blame the government for the disparity.

"It's not uncommon for people to think that their Social Security taxes, their 401(k) contributions, their share of employer health premiums, all of that stuff in their mind gets lumped into income taxes," Stretch said.

The federal income tax is the government's largest source of revenue, raising more than $900 billion — or a little less than half of all government receipts — in the budget year that ended last Sept. 30. But with deductions and credits, especially for families with children, there have long been people who don't pay it, mainly lower-income families.

The number of households that don't pay federal income taxes increased substantially in 2008, when the poor economy reduced incomes and Congress cut taxes in an attempt to help recovery.

[Pepsi]

so the federal gov't allows families to earn enough to support a family before taxing their income.   Of course they pay sales tax, SS tax, real estate tax, etc. 

good or bad thing you think?

[ivanm]

so the federal gov't allows families to earn enough to support a family before taxing their income.   Of course they pay sales tax, SS tax, real estate tax, etc. 

good or bad thing you think?

What is good or bad? 

[Pepsi]

What is good or bad? 

that "the federal gov't allows families to earn enough to support a family before taxing their income"

[notoc]

Not a good idea to tax people to the point they can purchase little more than essentials.

[ivanm]

that "the federal gov't allows families to earn enough to support a family before taxing their income"

If the family's income is from wages then all of it is taxed.  The exemptions are a game.  If we had no exemptions and adjusted the tax rates then the system would be simpler and just as fair.
Traditionally the tax code encouraged the formation of families but do we really need large families these days?  We need just enough births to offset the deaths each year.

[IM2]

About 47 percent will pay no federal income taxes at all for 2009. Either their incomes were too low, or they qualified for enough credits, deductions and exemptions to eliminate their liability. That's according to projections by the Tax Policy Center, a Washington research organization.

47 opercent is not half. So then the accuracy of the reproting must be questioned.Almost half would be more accurate. Less than half is even more accurate. But to say 50 percent of all americans are not paying taxes when that is not true, is another method of distortion used by conservatives.

Secondly you seem to ignore the working poor who don't make enough to pay taxes, and wish to make this some kind of conservative us who pay against them who don't pay whinery.

[Velleity]

I did a tax return for someone today who had invested in two houses. The property values crashed and he had no renters so he did deeds in lieu, and the lenders sent 1099 Cs. His tax preparer freaked out and told him he owed hundreds of thousands of dollars and that he had better go see a tax lawyer.

I told him I didn't know what his tax preparer was getting all excited about but I agreed to do his returns for the same fee he would have paid the tax preparer. For some reason the tax preparer, who had pulled out some big, official looking book, couldn't fathom the idea that the client had bases in the properties.

It's kind of what I would imaging Ivan would be like if he had a little more aptitude, giving bad advice and freaking people out over nothing.

Sure enough the loss wiped out all of this guy's "income" from the debt forgiveness and everything else. He ends up paying zero tax. And why not? As it turns out he lost his shirt. Do you really people who lose pretty much everything they have to pay an income tax?

[Velleity]

Why, Ivan? I know why "conservatives" do this. They do this because they think it reinforces their whole a priori conclusion about how great rich people are and how every problem is caused by the poor. How pathetic does one have to be to blame it all on the have nots?

So why do you buy into this crap, Ivan? What's so great about rich people?

I have had one client who was billionaire. You would probably recognize the family name. The family is friends of my families friends and they are one of the richest families in the world.

My one billionaire client stiffed me out of a lousy $1,000--basically stealing my time and my expertise like a petty thief. How noble. 

http://krugman.blogs.nytimes.com/2010/04/08/lucky-ducky-redux/

Lucky Ducky Redux

So the right is now apparently outraged at the fact that many Americans pay no income taxes — a true observation that is elided into the utterly untrue assertion that many Americans pay no taxes. (Almost everyone pays payroll taxes, everyone pays state and local sales taxes, etc.)

This isn’t new; remember the famous WSJ editorial about the lucky duckies who have the great good fortune to not pay income taxes because they’re, um, too poor to be above the minimum. I guess luck is in the eye of the beholder.

The thing to bear in mind is that overall, the US tax system isn’t actually that progressive: the payroll tax is regressive, as are most state and local taxes, which largely offsets the progressivity of the income tax.

So the right likes to pretend that the income tax is the only tax; it isn’t.

[Hollybaere]

Actually, if you are a true United States citizen or a true American, having to pay income tax is ILLEGAL.

It's true, check it out for yourself.


WASHINGTON -- Evidence strongly suggests that the 16th Amendment, which establishes the income tax, was not approved properly as required by the Constitution and was fraudulently ratified.

"If this evidence is true, the income tax is the greatest hoax ever perpetrated on the American people," says Robert L. Schulz.
http://www.givemeliberty.org/features/taxes/19990709_xcdfr_is_income.htm

http://en.wikipedia.org/wiki/Tax_protester_statutory_arguments

<a href="http://www.youtube.com/v/fFwJevCy0iw&amp;hl=en_US&amp;fs=1&amp;" target="_blank">http://www.youtube.com/v/fFwJevCy0iw&amp;hl=en_US&amp;fs=1&amp;</a>

[lucy]

Actually, if you are a true United States citizen or a true American, having to pay income tax is ILLEGAL.

It's true, check it out for yourself.

link?

[Hollybaere]

link?

I just posted one...look above

[lucy]

Thanks. hmmm/

[johnhp]

i strongly recommend both of you not refuse to pay taxes.  You know what they call people who follow these people claiming income tax is illegal?  Convicts.

[lucy]

I pay more in  taxes  to the IRS than GM it seems which paid NO taxes last year to the IRS and wants a huge refund/