47% will pay no federal income tax.....

[Roscoe]

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.
By Jeanne Sahadi, CNNMoney.com senior writer
September 30, 2009: 12:55 PM ET

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. To top of page

[Excaliber]

I don't understand how this is possible? Are the calculations based on people not having to pay income tax because the amount with held during the year means they either get a small refund or end up not owing anymore? Or does that mean that flat out people are getting back every cent with held by an empoyer for Fed Tax?

I mean EVERY year of my life, some good, some bad, the Government has kept whatever was with held from my salary or I've had to pay more on top of that. Who are these 47% and what the heck am I doing wrong that I have to pay taxes?

These numbers sound very strange...

If you don't owe any taxes how can you get a Tax Break or refund, by the way?

[Roscoe]

It's called an "Earned Income Tax Credit"

Maybe you're working too hard.????....

If you do some more research you will find these numbers are correct.

Roscoe

[Excaliber]

OK, I did the Google and found a thing on it, I don't qualify. Likely never will in this life!

Looks like it has a LOT to do with families. After you enter all the data your taxable income has to come out to around $12,000 a year to be eligible. How in the heck a family can survive on $12,000 a year is beyond me. I can't do that and I'm single!

Interesting post, thanks Roscoe.

[Fordzilla]

"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."

Yes, it has to do with having a family/dependents. I have 3 kids & with all the earned tax credits get more money back then I paid in.

[Sharroll Celby]

I would gladly pay 10% of my income as tax. I would also like to see a system with NO income tax, but a "Value-Added" tax (VAT) on ALL purchases.

[Paul F]

Which is counter-intuitive. Those with children should pay more as they present more of a burden.

[BeanCounter]

Originally Posted by Paul F

Which is counter-intuitive. Those with children should pay more as they present more of a burden.

Agreed. I think you'll find that those most of the people with the most children are also the ones who can least afford them. But then they wouldn't pay any tax any way under the Democrats. Check the average number of children by ethnic group.

[Paul F]

...and thus the incentive not to have them unless you can afford them. I think persons with children should pay an extra $5K per year for each child.

[DAVID GAGNARD]

Originally Posted by Excaliber

OK, I did the Google and found a thing on it, I don't qualify. Likely never will in this life!

Looks like it has a LOT to do with families. After you enter all the data your taxable income has to come out to around $12,000 a year to be eligible. How in the heck a family can survive on $12,000 a year is beyond me. I can't do that and I'm single!

Interesting post, thanks Roscoe.

Very simple, you live in FREE goverment housing, get FREE food stamps,get a SSI or other check for each of your "handicapped" kids, they get FREE meals at school, a big yellow bus delivers them to and from school daily, for FREE,you have some sort of job that pays cash, ie; not reported to the IRS, well you get the idea, and with all this you get to drive a nice big white Escalade!!!!!!!!!!!!!!!!

You don't believe me, just come down here starting the second week of this coming January and go with my wife to work for a few days and see for yourself. She does seasonal work for a local tax return office that does on-line electronic filing.......6 to 10 dependents, no REPORTED income, and they get back from 4 to 8 grand a year, or more!!!!!!!!!!!!! they come and go thru the office all day long............

Yes, it has to do with having a family/dependents. I have 3 kids & with all the earned tax credits get more money back then I paid in.

As it should be, for those that DO pay in!!!!!!!!!!!!!!!!


David

[Dan40]

Obama's policies, if passed, by 2012, will have 6 out of 10 Americans RECEIVING more money from the Government than they paid in.
Does that need to be pointed out that it is an unsustainable situation for the future of the USA?

[Ronbo]

Originally Posted by Sharroll Celby

I would gladly pay 10% of my income as tax. I would also like to see a system with NO income tax, but a "Value-Added" tax (VAT) on ALL purchases.

Seems like a good idea except for one thing... Incentive.

If the tax system is comprised of sales tax only, the government's incentive is to foster consumer spending. (bad idea)

A flat income tax (and only income tax, no business taxes or the endless "fees") would give the government incentive to increase earning. No more hiding taxes in product prices.

Things like wars would have to be paid for with voter approved "special taxes" that are revoked at the end of the conflict. No voter approval, no war. No results, we pull your funding.

Any person in public service found guilty of corruption, death penalty.

[Excaliber]

Well I'm not about to rush out and start having kids again so I can qualify, I'll tell ya that for sure!

[392cobra]

Every Cent You Make

http://www.youtube.com/watch?v=VRRsfCD1Bh0

[Wes Tausend]

...

Back in the '80's, right before April 15th, I made up a clipboard petition with a letter to be sent to the IRS. On it was a statement something to the effect that:

"Since you are taxing me (us) for just about everything else, you may as well tax and take my next unborn contained in the attached Trojan."

Stapled to the sheet was a condom. It was "new" yet, in actuality.

I circulated this mock petition at a bowling alley and was surprised to see the majority of people laugh and then sign their real name to the list. Guess League Bowling folks like their beer.

My team encouraged me to present it to the dour and sober looking manager that ran the alley. I was reluctant, because if she didn't see the humor, I might be asked to remove myself, and petition, and be unable to continue bowling. She was about 25 years old and not bad to look at, probably taught Sunday School.

I finally took it over and she never even smiled as she signed it. As she was signing it, she casually remarked that, "This is not a Trojan."

So much for Sunday School. She was correct. It was a different, lesser known brand, condom.

Wes

...

[Dan40]

Originally Posted by Sharroll Celby

I would gladly pay 10% of my income as tax. I would also like to see a system with NO income tax, but a "Value-Added" tax (VAT) on ALL purchases.

Whatever tax method used for collection, fails, unless real spending is actually reduced. And "BIG Government" always requires more and more spending.

[Roscoe]

Value added tax systems stink (see UK). Best is flat tax or national sales tax with super majority needed to change. The latter will also effect people working off the books where a flat tax would not.

Also, for an education in what is known as The Laffer Curve, go to http://faustasblog.com/ and scroll down to the video. Very educational.

Roscoe

[392cobra]

Originally Posted by Paul F

Those with children should pay more as they present more of a burden.

What do you think of the lastest bright idea by the Dims...


Coming Soon: $500 for Every Newborn?
By Kimberly Palmer
On 11:52 am EDT, Tuesday October 6, 2009

Imagine a world where every baby received a trust fund at birth. It might sound like a fairy tale, but being born into money--or at least into a $500 savings account--could soon become reality for all children born in the United States. Lawmakers are considering a bill that would give each newborn just that, with the goal of promoting savings that would later be used for education, a first home, or retirement. Here's what you should know about the ASPIRE ("America Saving for Personal Investment, Retirement, and Education") Act:

How would this program work?

The ASPIRE Act would give each child born in the United States a $500 savings account. Recipients could then use that money once they were older to pay for education, a first home, or retirement. Low-income children would receive additional funding, and all participants could add to their accounts over time.

http://finance.yahoo.com/news/Coming....html?x=0&.v=1

[Paul F]

Hoo Ray! I'm a'goin to start pro-creatin'! That's what the world needs. More people.

[fastd]

Originally Posted by Sharroll Celby

I would gladly pay 10% of my income as tax. I would also like to see a system with NO income tax, but a "Value-Added" tax (VAT) on ALL purchases.

I think you mean national sales tax. Value-added taxes are no good, they tax every stage of production - a real mess.