To answer the first part of the question. The answer is yes you have to pay taxes. In fact despite all the conspiracy theories and constant political threats to shut down the IRS because, taxes are the law of the land. It is known as the Internal Revenue Tax Code, which is Title 26 of the United States Code. But there are in fact a number of legal ways to avoid paying taxes, which come down to reducing your taxable income. Which can be very different from your earned income.
Just when I thought I have seen most statistics, CNN brings us estimates by the nonpartisan Tax Policy Center, that In 2009, roughly 47% of households, or 71 million, will not owe any federal income taxes. What’s more is that, some of these non-tax payers will get additional money from the government because they qualify for refundable tax breaks and credits under President Obama’s economic stimulus program.
There are some clarifications in the article since people pay more than just federal income taxes. If you factor in payroll taxes, which support Social Security and Medicare, the percent of households with a net liability of zero or less is estimated to be 24% this year. Still that is a big number and likely to rise as unemployment and the number of retired workers increase.
The 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 progressively can be dialed up or down.
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 budget 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.
I can understand that taxing the poor is not the best idea for a sustainable economy, but the fact that we have a growing proportion of people who won’t pay taxes is concerning from when I think of the longer term impacts (like the availability of Medicare and Social Security). Further, it will make be think twice before supporting all the government sponsored stimulus programs which future generations and I will have to pay for with higher taxes.
What are your thoughts on this? Is the American tax system fair in taxing the rich or does it provide too much leeway?
~ America’s Income and Wealth Inequality
~ Updates & Taxes on the 2009-2010 Economic Stimulus Credits and Payments
~ Credit Card Reform via the 2009 Cardholders’ Bill of Rights
~ Job, Home and Stimulus Tax Breaks and Traps in Difficult Financial Times
~ Can’t afford to pay my taxes! What happens if I file late and can I get an extension
3 thoughts on “Do I have to Pay Taxes and How Nearly 50% of American Households Pay No Federal Taxes”
first of all, tpc is not non-partisan. the portion of the tax code that bothers me most is the so-called earned income credit. this is the part where some people pay no tax whatsoever, and yet receive a “refund”. however, this is not half of the population as is incited by this column. it is actually 30% of the 50% indicated here. while it is definitely dreadful, it is not as dividing as the tpc would want it to be.
First taxes should a a flat percentage reguardless of the amount, EVERYONE SHOULD PAY THE SAME PERCENTAGE. Tax deductions shouldn’t be regulated by income either, just capped at a dollar amount or again a percentage. Here are some more interesting numbers to go with those according to the U.S. Census Bureau 54.87% of Americans make $50,000 a year or less. 84.7% make less than $100,000. So only 15.3% of Americans make over $100,000 and of those 6.7% don’t pay federal income taxes, that is 759,000 wealthy individuals not paying taxes out of 4,960,784 total individuals. On the other hand of the 91,366,906 individuals in the 50k or less bracket 21,928,057 have no income at all leaving 69,438,848 left to pay taxes and 41,571,943 don’t that is 59.8% that is a huge amount and is unacceptable and that is just in the under 50k mark and omits the Zero income individuals. Granted some of these tax breaks are given for children, bad idea in my opinion but thats government (you had the children, take responsibility for them), and some for large purchases makes a sense, stimulates the economy…there is a long list of deductions available and these deductions should be available to everyone not just the poor, but again everyone should pay the same PERCENTAGE in taxes because 8% is 8% whether its a million being taxed or a thousand it is 8% and rich or poor would pay the same percentage. So in conclusion our system is broken and needs to be fixed but won’t be because that is government. Also only 1% of Americans belong to whats known as the capitalist class, these are high rung POLITICIANS and are considered “The Super Rich”. Last I checked Politicians were supposed to be PUBLIC SERVANTS, and again servants aren’t supposed to be “Super Rich”. Being an American politician has become a position of entitlement when it should be a position of service, at no point in our recent history has Congress rejected a pay raise even with our mounting debt. We have many public servants Police, Firefighters, Teachers, Soldiers, most of which belong to that under $100,000 a year bracket and must work very hard and for a very long time to recieve a glimmer of the benefits bestowed upon a Senator after a single term in office. A U.S. Senator gets $174,000(2009) up from $169,300(2008) annually along with other perks as well as ALL EXPENSES, they also have a fantastic retirement plan that requires 20 years of service. I have begun to ramble so I will end with this “I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.” Thomas Jefferson. “A wise and frugal government, which shall leave men free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned – this is the sum of good government.” Thomas Jefferson. “Any people anywhere, being inclined and having the power, have the right to rise up, and shake off the existing government, and form a new one that suits them better. This is a most valuable – a most sacred right – a right, which we hope and believe, is to liberate the world.” Abraham Lincoln. “All wars are follies, very expensive and very mischievous ones.” Benjamin Franklin. “They who can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety.” Benjamin Franklin.
A very detailed response and some statements that do make sense.