Wednesday, April 07, 2010

Nearly half of US households escape fed income tax - Yahoo! Finance

Nearly half of US households escape fed income tax - Yahoo! Finance: "WASHINGTON (AP) -- 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."

It would be interesting to see what the correlation is between paying income tax or not and supporting big federal spending programs. Somehow I think the people who pay the income taxes are not so keen on the huge deficits the federal government is running up.


Beth said...

As a taxpayer who also supported health care reform, I'd like to know this, too. Maybe there is a correlation, maybe not, but facts are better than speculation.

I just visited the Tax Policy Center website and was interested to read their "5 myths" about taxes. Some of those myths I used to believe.

DBX said...

And that has been the US system, at least for the past 70 years, including the almost relentless economic growth from the early 1930s to the 1970s. State and local taxes are regressive. Your average poor person is paying a bundle in sales tax -- a way higher share of income in sales tax than for the rich -- simple because most of a poor person's disposable income goes on consumables that are taxable. I can guarantee that they're effectively paying property tax too; that's included in the rent. And at a higher rate than single family residential, I might add.

Rather than doing the European thing of simply centralizing government, the American way has been to offset this with a progressive federal income tax. But that was seriously rocked by President Reagan's first term, and utterly shattered by the events of Clinton's second term (huge Gingrich cuts in investment taxes acquiesced to by the White House, and admission of China to the WTO) and the Bush presidency (huge cuts in upper bracket income taxes, all while corporate pork and defense spending continued to soar). And more and more formerly federal functions got offloaded to the states and cities, who simply aren't financially up to the task and, if they do get around to paying for it, do so with highly regressive taxes.

So here's where we're at. The poor person's "good" job got shipped off to China; if they're employed at all, they're now in a job that's not only nasty and boring but also doesn't pay squat, their rent has gone up due to the landlord's property taxes, their consumables are more expensive due to sales taxes, they face more user fees and so on, and of course don't forget payroll taxes which aren't levied on marginal income once you're into six figure territory. If the poor aren't paying federal tax it is because they have been so systematically screwed by changes in government policy they've dropped out of the bottom bracket.

And the coupon clipping class gets ever-bigger dividend checks and ever-lower federal tax rates -- a much bigger deal to them than the increases in state and local taxes which to them are relatively modest. Even a New Trier-sized property tax increase isn't much compared to a Bush-sized upper-income tax cut.

No democracy and certainly no capitalist economy can survive going on kicking the legs out from under the mass of its population like this. There are parallels, especially in the economy, with the later Roman Empire with an elite forming itself into an upper class, closing the admissions door on everyone else, and bleeding the rest of the economy white. What happened then was that a sound money, currency-based economy collapsed under the weight of their revolting elites and degenerated into a dysfunctional mess limited to virtual credit and barter that lasted for several hundred years -- which, come to think of it, might well already be happening today. When was the last time we paid cash on a major purchase?