47% Will Pay No Federal Income Tax

[101A]

The path we are currently on is not sustainable. /cliche

http://money.cnn.com/2009/09/30/pf/taxes/who_pays_taxes/index.htm?postversion=2009093012


47% Will Pay No Federal Income Tax
An increasing number of households end up owing nothing in major federal taxes, but the situation may not be sustainable over the long run.

NEW YORK (CNNMoney.com) -- Most people think they pay too much to Uncle Sam, but for some people it simply is not true.
In 2009, roughly 47% of households, or 71 million, will not owe any federal income tax, according to estimates by the nonpartisan Tax Policy Center.
Some in that group will even get additional money from the government because they qualify for refundable tax breaks.
The ranks of those whose major federal tax burdens net out at zero -- or less -- is on the rise. The center's original 2009 estimate was 38%. That was before enactment in February of the $787 billion economic recovery package, which included a host of new or expanded tax breaks.
The issue doesn't get a lot of attention even as lawmakers debate how to pay for policy initiatives like health reform, whether to extend the Bush tax cuts and how to reduce the deficit.
The vast majority of households making up to $30,000 fall into the category, as do nearly half of all households making between $30,000 and $40,000.
As you move up the income scale the percentages drop.
Nearly 22% of those making between $50,000 and $75,000 end up with no federal income tax liability or negative liability as do 9% of households with incomes between $75,000 and $100,000.
Of course, income taxes don't tell the whole story. Workers are also subject to payroll taxes, which support Social Security and Medicare.
When considering federal income taxes in combination with payroll taxes, the percent of households with a net liability of zero or less is estimated to be 24% this year, according to the Tax Policy Center's estimates.
A key reason why there is a zero-liability group at all is because the U.S. tax system is progressive. Those who bring in more money pay more than those lower down the income scale to support government functions such as national defense and social safety nets like Medicaid for those in need. That progressivity can be dialed up or down.
"Some think it's too progressive. Some don't think it's progressive enough," said Roberton Williams, a senior fellow at the center.
President Obama falls into the latter camp. He has proposed increasing the income tax burden on families making more than $250,000 and individuals making more than $200,000, while offering new measures to reduce the tax bite for most Americans making less.
One of Obama's proposals is to extend the 2001 and 2003 Bush tax cuts for everyone except high-income tax filers, which was the group that derived the most benefit from those cuts.
As a result, under Obama's budget, he would keep the ranks of the non-payers higher than they would otherwise be.
Why the tax-free matter
The question of who pays and who doesn't is not a trivial matter. But Washington policymakers are not dealing with it in an explicit way.
And that's a problem, given the country's fiscal outlook.
If asked to vote up or down on whether they are comfortable with such a large group of voters contributing no federal income tax or payroll tax revenue, the majority may well decide it is appropriate given the means of the households involved. Or they may decide that it's not.
Either way, that decision should inform the debate about the many costly policies and deficit-reduction strategies that lawmakers will be grappling with for years to come.
"As the number [of nonpayers] becomes larger, we have to question whether we'll make good decisions about how to allocate resources," economist George Zodrow, a professor at Rice University. "Most people don't understand how skewed the tax distribution is."
Experts say that to pay for all the things on the country's growing tab, the money can't just come from a shrunken pool of taxpayers.
"Over the long run, you'll have to have a broader base," Zodrow said

[2centsworth]

A lot of those receive money from the government come income tax time.

Sad part is that a 100% tax on all assets and Income still doesn't pay what we owe.

The current solution is to have our Kids foot the bill. Each of my kids is saddled with $386,000 of govt. debt.

[CosmicCowboy]

If more people paid some tax and had skin in the game, more people would be concerned with the politicians they elect being fiscally responsible. Soon the majority will just be voting for the politician that promises them the most benefits for free. That's when the US economy comes completely unwound. At some point you can't have more people riding in the wagon than are pulling the wagon.

[Wild Cobra]

If more people paid some tax and had skin in the game, more people would be concerned with the politicians they elect being fiscally responsible. Soon the majority will just be voting for the politician that promises them the most benefits for free. That's when the US economy comes completely unwound. At some point you can't have more people riding in the wagon than are pulling the wagon.
I've been saying that for years. Liberals don't seem to understand.

[101A]

If more people paid some tax and had skin in the game, more people would be concerned with the politicians they elect being fiscally responsible. Soon the majority will just be voting for the politician that promises them the most benefits for free. That's when the US economy comes completely unwound. At some point you can't have more people riding in the wagon than are pulling the wagon.


If you count the VAST majority of Americans who pay less than there piece of the pie (budget/population) we are already there.

[Winehole23]

There seems to be an emerging consensus that Obama needs to raise taxes on somebody.

Who again?

[101A]

There seems to be an emerging consensus that Obama needs to raise taxes on somebody.

Who again?

Everybody; along with substantial spending reductions. Otherwise the increases are pointless.

[2centsworth]

There seems to be an emerging consensus that Obama needs to raise taxes on somebody.

Who again?

needs to raise tax "revenue". Part of the underlying story is that a 100% tax on everything(home equity, stock, etc...) still isn't enough.

[Wild Cobra]

If you count the VAST majority of Americans who pay less than there piece of the pie (budget/population) we are already there.
Exactly, and why we have an ACORN loving Socialist in office now. Unless those of us who believe in freedom all turn out in the next election, we are screwed.

[Winehole23]

needs to raise tax "revenue". Part of the underlying story is that a 100% tax on everything(home equity, stock, etc...) still isn't enough.Let me guess. Is the solution a tax cut?

[Winehole23]

hyberbole?Morning cup of coffee.

[Winehole23]

Everybody; along with substantial spending reductions. Otherwise the increases are pointless.This is what I think too. But it isn't a winning slogan for anybody, except maybe for George Voinovich:

Raise taxes, cut benefits.

Back when Ohio faced bankruptcy, isn't that more or less what Voinovich did?

Shouldn't we consider pursuing a similar course once GDP shows showing steady growth?

Tighten our belt, and pay our fucken bills.

[Wild Cobra]

hyberbole?
Me?

If you say so. We view things differently. Freedom is not something you can plan to keep with authoritarians in office!

[Winehole23]

If you say so. We view things differently. Freedom is not something you can plan to keep with authoritarians in office!Can't wait til 2012? :lol

[2centsworth]

Let me guess. Is the solution a tax cut?


800lb gorilla is entitlement spending. without a significant increase in the tax base, our current path is unsustainable without hyper-inflation (see Dr. Doom Roubini).

Economic growth should be priority #1, but that requires "profit".

[boutons_deux]

"had skin in the game"

what bullshit. People who are too poor to pay income taxes are living from week to week and for the most part, even like people in the middle class, feel totally disconnected and powerless from what's going in DC.

btw, other industrial countries with much higher taxes (and universal health coverage as "entitlement") all give income tax breaks to people on the low end. Only small proportion of the working population actually pays income taxes.

"800lb gorilla is entitlement spending"

what bullshit. the problem is what healthcare costs, that requires the exorbitant level of spending.

But none of you righties want to blame the healthcare industry for its criminal ripoff and fraudulent practices.

[Winehole23]

what bullshit. People who are too poor to pay income taxes are living from week to week and for the most par, even like people in the middle class, feel totally disconnected and powerless from what's going in DC. The disconnection is real. I agree with that.



But none of you righties want to blame the healthcare industry for its criminal ripoff and fraudulent practices.Overstated. Some of us do.

Everyone can see there's a problem with health care costs. Just because you don't like the first solution to come down the pike, doesn't mean you don't care about solving the problem.

Essentially, neither party wants to manage the costs, so at a minimum we'll have an insurance mandate that in essence is a subsidy to insurance companies.

It remains to be seen whether the public option sneaks in or reconciliation (http://firstread.msnbc.msn.com/archive/2009/09/29/2082655.aspx) instructions are sent.

[spurster]

47% Will Pay No Federal Income Tax.
An increasing number of households end up owing nothing in major federal taxes, but the situation may not be sustainable over the long run.


This article reminds of the cliche that there are lies, damned lies, and statistics.

For the rest of the story, we should look at the total tax burden, not just one tax. I hope I transcribed the following table correctly, which show that our total tax burden as a percentage of income is not far from flat.

http://www.ctj.org/pdf/taxday2009.pdf



Incomes and Federal, State & Local Taxes in 2008

Shares of TAXES AS A % OF INCOME
Average ------------- -----------------------------
cash Total Total Federal State & Total
income Income Taxes Taxes Local Taxes Taxes

Lowest 20% $ 12,000 3.2% 2.0% 6.8% 11.9% 18.7%
Second 20% 24,500 6.7% 5.0% 11.0% 11.2% 22.3%
Middle 20% 40,000 11.1% 10.1% 15.9% 11.1% 27.0%
Fourth 20% 66,100 18.4% 18.5% 18.9% 11.1% 30.0%
Next 10% 101,000 14.0% 14.8% 20.3% 11.1% 31.5%
Next 5% 144,000 10.1% 10.9% 21.4% 10.8% 32.2%
Next 4% 253,000 14.3%` 15.5% 22.0% 10.1% 32.1%
Top 1% 1,445,000 22.2% 23.0% 22.7% 8.2% 30.9%

ALL $ 70,400 100.0% 100.0% 19.4% 10.3% 29.8%


Notes:

1. Taxes include all federal, state & local taxes (personal and corporate income, payroll, property, sales, excise, estate etc.).

2. For calculations of income shares and taxes as a % of income, income includes employer-paid FICA taxes and corporate profits net of taxable dividends, neither of which is included in the average cash income figures shown.

Source: Institute on Taxation and Economic Policy Tax Model, April 2009

[boutons_deux]

This corresponds to what I read Reich saying, that the low-end earners pay 80% of their taxes in payroll tax, not income tax, suggesting a payroll tax holiday for a year or so would be one way to put money in consumers pockets.

[101A]

This article reminds of the cliche that there are lies, damned lies, and statistics.

For the rest of the story, we should look at the total tax burden, not just one tax. I hope I transcribed the following table correctly, which show that our total tax burden as a percentage of income is not far from flat.

http://www.ctj.org/pdf/taxday2009.pdf



Incomes and Federal, State & Local Taxes in 2008

Shares of TAXES AS A % OF INCOME
Average ------------- -----------------------------
cash Total Total Federal State & Total
income Income Taxes Taxes Local Taxes Taxes

Lowest 20% $ 12,000 3.2% 2.0% 6.8% 11.9% 18.7%
Second 20% 24,500 6.7% 5.0% 11.0% 11.2% 22.3%
Middle 20% 40,000 11.1% 10.1% 15.9% 11.1% 27.0%
Fourth 20% 66,100 18.4% 18.5% 18.9% 11.1% 30.0%
Next 10% 101,000 14.0% 14.8% 20.3% 11.1% 31.5%
Next 5% 144,000 10.1% 10.9% 21.4% 10.8% 32.2%
Next 4% 253,000 14.3%` 15.5% 22.0% 10.1% 32.1%
Top 1% 1,445,000 22.2% 23.0% 22.7% 8.2% 30.9%

ALL $ 70,400 100.0% 100.0% 19.4% 10.3% 29.8%
Notes:

1. Taxes include all federal, state & local taxes (personal and corporate income, payroll, property, sales, excise, estate etc.).

2. For calculations of income shares and taxes as a % of income, income includes employer-paid FICA taxes and corporate profits net of taxable dividends, neither of which is included in the average cash income figures shown.

Source: Institute on Taxation and Economic Policy Tax Model, April 2009

Good find.

I would like to see the data compiled by a less biased group, however. Since they don't go into their methodology in depth, I can't begin to tell if there is funny business going on; although I do assume they are presenting the data to make their own argument as stong as possible (since everyone does).

I know that as my family has grown from the lowest income bracket to the highest, our take home pay is a whole bunch lower as a percentage of that income than it was; all taxes included. I know it is a sampling of one; but "flat" is not at all how I would describe my experience. I do like that they include Social Security and Medicare WITH the employer match; people don't understand how frightfully high those taxes are. Minimum Federal income tax (including payroll taxes) is nearly 15% for the poorest among us! And yet, the govt (we) are spending way, way way more than it is collecting! So, even with those figures, the situation is not tenable. Taxes have to go up, but more importantly, spending MUST get controlled.

[101A]

This corresponds to what I read Reich saying, that the low-end earners pay 80% of their taxes in payroll tax, not income tax, suggesting a payroll tax holiday for a year or so would be one way to put money in consumers pockets.

I wonder if the proposed holiday would include the employer match? Would employers be compelled to pay that to the employee, or would the govt. still collect it?

[LnGrrrR]

I was reading an article that posited that any sort of "Fair Tax" would be anything but. It was mainly based on the idea of money that is necessary for survival and money that isn't.

As you raise more money, for instance, spending the same amount of a sales tax affects you drastically less. For a simple example, say an item costs 1000$, and the tax is 20%, making the total cost $1200. That's going to affect the person who makes $2000 a month much more than the person making $20,000 a month in terms of percentage.

Now, I'm not sure that necessarily makes the Flat Tax undesirable, but it's a point of data to consider.

[boutons_deux]

sure, flat taxes, like VAT or flat income taxes are always regressive, hurting the low end much worse than the high end earners.

that's why countries with VAT, like in Europe, have big offsets/rebates for low end earners, to compensate for VAT regressivity.

[mogrovejo]

I was reading an article that posited that any sort of "Fair Tax" would be anything but. It was mainly based on the idea of money that is necessary for survival and money that isn't.

As you raise more money, for instance, spending the same amount of a sales tax affects you drastically less. For a simple example, say an item costs 1000$, and the tax is 20%, making the total cost $1200. That's going to affect the person who makes $2000 a month much more than the person making $20,000 a month in terms of percentage.

Now, I'm not sure that necessarily makes the Flat Tax undesirable, but it's a point of data to consider.

Sure, the flat tax isn't progressive. But why should it be? You can have a progressive fiscal system, if you wish so, without having a progressive tax system.

[2centsworth]

This article reminds of the cliche that there are lies, damned lies, and statistics.

For the rest of the story, we should look at the total tax burden, not just one tax. I hope I transcribed the following table correctly, which show that our total tax burden as a percentage of income is not far from flat.

http://www.ctj.org/pdf/taxday2009.pdf



Incomes and Federal, State & Local Taxes in 2008

Shares of TAXES AS A % OF INCOME
Average ------------- -----------------------------
cash Total Total Federal State & Total
income Income Taxes Taxes Local Taxes Taxes

Lowest 20% $ 12,000 3.2% 2.0% 6.8% 11.9% 18.7%
Second 20% 24,500 6.7% 5.0% 11.0% 11.2% 22.3%
Middle 20% 40,000 11.1% 10.1% 15.9% 11.1% 27.0%
Fourth 20% 66,100 18.4% 18.5% 18.9% 11.1% 30.0%
Next 10% 101,000 14.0% 14.8% 20.3% 11.1% 31.5%
Next 5% 144,000 10.1% 10.9% 21.4% 10.8% 32.2%
Next 4% 253,000 14.3%` 15.5% 22.0% 10.1% 32.1%
Top 1% 1,445,000 22.2% 23.0% 22.7% 8.2% 30.9%

ALL $ 70,400 100.0% 100.0% 19.4% 10.3% 29.8%
Notes:

1. Taxes include all federal, state & local taxes (personal and corporate income, payroll, property, sales, excise, estate etc.).

2. For calculations of income shares and taxes as a % of income, income includes employer-paid FICA taxes and corporate profits net of taxable dividends, neither of which is included in the average cash income figures shown.

Source: Institute on Taxation and Economic Policy Tax Model, April 2009

that's one of the worst report I have ever read. Not a single thing substantiated. The charts are hilarious, Total Tax. Lets break that down.

We already know personal and corporate are out of the picture.

So that leads us to Payroll Taxes (Social Security and Medicare). Lets not mention lower income tax brackets receive way more out of those programs than they put in, so those are out.

What's left? Estate Taxes... nope.

Excise taxes? Are we really going to include the cost of cigarettes and Alcohol?

That leaves us with Sales Taxes. Now redo the entire study using Sales Taxes to make it legitimate.

[nuclearfm]

This decade has had a pronounced increase in the gap between the rich and the poor. It hold true to the Idea that Republicans get rich people richer. The only problem is that they screw everything else up in the process.

This will correct later, rather than sooner.

[Winehole23]

What makes you think so? With all the unemployment, bankruptcy and default, I'd expect the rich to get even richer, relatively speaking.

[NoOptionB]

The hard working, intelligent, & passionate still get ahead. That is natural law. No man-made system or boundaries can fuck with natural law.

No reason in listening to losers tell you, you will lose.

[spurster]

that's one of the worst report I have ever read. Not a single thing substantiated. The charts are hilarious, Total Tax. Lets break that down.

We already know personal and corporate are out of the picture.

So that leads us to Payroll Taxes (Social Security and Medicare). Lets not mention lower income tax brackets receive way more out of those programs than they put in, so those are out.

What's left? Estate Taxes... nope.

Excise taxes? Are we really going to include the cost of cigarettes and Alcohol?

That leaves us with Sales Taxes. Now redo the entire study using Sales Taxes to make it legitimate.

The results are similar to stuff I dug up some years back. If you don't like it, find your own reports. I would guess, though, with the emphasis on only the Federal income tax in the "let's feel sorry for rich guys" articles, that you won't find much support for your presuppositions.

[DMX7]

What % of the population pays taxes doesn't mean shit. It's how much total revenue collected that means something.

[coyotes_geek]

It sure as hell means something if you're in the half that has to provide the revenue the government collects.

[spursncowboys]

"had skin in the game"

what bullshit. People who are too poor to pay income taxes are living from week to week and for the most part, even like people in the middle class, feel totally disconnected and powerless from what's going in DC.

btw, other industrial countries with much higher taxes (and universal health coverage as "entitlement") all give income tax breaks to people on the low end. Only small proportion of the working population actually pays income taxes.

"800lb gorilla is entitlement spending"

what bullshit. the problem is what healthcare costs, that requires the exorbitant level of spending.

But none of you righties want to blame the healthcare industry for its criminal ripoff and fraudulent practices.
dc is all libs. there is also no reason and pointing to other countries who have the upper 50% pay the taxes. It is a great sales pitch to get elected. "i am going to make a law, payed by the rich, to (allegedly) help the poor." The question is -is it right? Why is it not considered stealing?
Also there is the idea that all citizens would have to pay if a politicial wants to bailout another group of companies. Hopefully deterring politicians from spending our money to get reelected. If everyone was paying the same percent, it would be more fair.

[spursncowboys]

What % of the population pays taxes doesn't mean shit. It's how much total revenue collected that means something.
how much taxes of the bottom's total revenue does the govt. collect?

[spursncowboys]

What makes you think so? With all the unemployment, bankruptcy and default, I'd expect the rich to get even richer, relatively speaking.
In the bear market years, the unsuccessful co, will go under, and when the market recovers and the bull markets come back, more people will use the more opportunities. Bankruptcy, unemployment, and defualt shouldn't have anything to do with lack of opportunties.

[TDMVPDPOY]

federal tax dont mean shit

when ur paying other taxes on goods/services under different titles

[2centsworth]

The results are similar to stuff I dug up some years back. If you don't like it, find your own reports. I would guess, though, with the emphasis on only the Federal income tax in the "let's feel sorry for rich guys" articles, that you won't find much support for your presuppositions.

No, I picked apart the data. If you don't like facts continue your dilusion you have something to say on this matter.

[spurster]

Ok, here's another table for you. It's transcribed from Figure 3 on p. 24.

http://www.taxfoundation.org/publications/show/2282.html

Figure 3. Federal, State and Local Effective Tax Rates, Calendar Year 2004
Federal, State and Local Effective Tax Rates, 2004



Federal State and Total
Taxes Local Taxes Taxes

Bottom 20% 5.0% 7.9% 13.0%
Second 20% 12.9% 10.3% 23.2%
Third 20% 17.4% 10.9% 28.2%
Fourth 20% 20.2% 11.2% 31.3%
Top 20% 24.3% 10.3% 34.5%


Source: Tax Foundation

[2centsworth]

What nonsense. It's already been established per the IRS that the bottom 47% pay zero federal taxes. Your little propoganda piece is for people who don't know any better. (in response to post above)

[Wild Cobra]

that's one of the worst report I have ever read. Not a single thing substantiated. The charts are hilarious, Total Tax. Lets break that down.

I agree to that aspect. They are including the taxes people don't see. However, if we remove the employer payroll tax alone, we get the following from the lowest 60%:


Income bracket % taxes
Lowest 20% -0.65%
Second 20% 3.55%
Middle 20% 8.45%

That of course varies with single filers to married with children. If we were to break it down farther, I'm sure it supports the contention that 47% of the people pay no federal taxes. Actually, I would assume more than 47% by those numbers.

[Wild Cobra]

What % of the population pays taxes doesn't mean shit. It's how much total revenue collected that means something.
It means allot.

People who who are net receivers of federal tax monies should not have the right to vote in politicians who promise them other of people's money.

This is legalized theft and should be stopped.

[spurster]

What nonsense. It's already been established per the IRS that the bottom 47% pay zero federal taxes. Your little propoganda piece is for people who don't know any better. (in response to post above)

So you don't believe the Tax Foundation? Are they too liberal for you?

[boutons_deux]

"net receivers of federal tax monies should not have the right to vote"

this is GREAT ADVICE. It would disenfranchise most govt-hating/handout-loving RED STATES! :lol