50% of Americans do not pay income tax?

[flacaltenn]

50% of Americans do not pay income tax.

I have been hearing this mantra from the media and politicians for several weeks now. I have not seen any statistical or logical explanation of this statement.

I am hoping that, in this post, I can wrap my head around this monumental claim. How is it that Congress has allowed a set of rules to evolve that facilitates half of the country not paying income tax?

What I suspect is that the real situation involves a few Orwellian idioms which imply that many of these people are not paying income tax when, in fact, they are.

Let me first explain the Orwellian idioms:

Tax credit: A person with children gets a “tax credit”. It is applied to the amount owed the IRS for income tax. For each child $1000 “credit” is added. If that person has three children and owes $1,000 his income tax owed becomes -$2,000 ……..(1000x3) – 1000 = 2000…….. If this were actually a “tax credit” he would owe nothing and he would not receive any refund as he had “credit” for the amount he owed. The IRS ends up paying the man $2000 dollars. This makes the “credit” not a credit at all but an endowment.

Paid income tax: If a person did not make a payment to the IRS in any given year, he did not “pay income tax”
Did he pay income tax that year?

My assumption is that in the statement of “50% of Americans do not pay income tax.” He is included in not paying income tax as he was not required to write a check to the IRS.

In fact he did “pay his income tax” for that year. The IRS elected to pay him (not give credit for) $1000/child and he had three children.

He paid $1000 and received $2000 balance.

Please let me know if I am correct in assuming that these people are included in the 50% tally.

If not, how is it that the Federal Government has gotten us to a point that only half of our citizens pay income tax.

Three problems with your "excuses"..

1) One it doesn't really matter because the axiom comes directly from IRS records of tax filers showing HOW MUCH they paid.

2) Pretty sure you don't get refunds on EXCESS tax credits.. At least not for personal returns if the amount you paid in EXCEEDS your tax liabilities (which include tax credits) -- you get a refund. But you can't get back MORE than you paid in unless it's EITC or other "special credits".

3) By your logic --- GE DID pay massive income taxes. They simply got sufficient credits from the govt however to cancel out their bill.. But in their case -- they CAN carry over some of those credits from year to year. So not only does it take their check to the IRS down to Zero -- it's bankable too..

Arguing whether it's a matter of tax bracket or tax credit doesn't matter.. That just makes you sound like Grover Norquist.

What matters is WHERE the source of tax revenue is coming from. And it AIN'T coming from the lower 50% of filers anymore..

BTW: You can ALL (especially you leftists) thank BUSH for that since his tax cuts ADDED about 10% to the number of filers excused from paying any income tax..

 

[Chris]

 

[auditor0007]

Huh... Everytime I hear about a flattening of tax rates and lowering of the brackets but eliminating loopholes...

All I hear is psychotic screaming from the left as their meds wear off and need to be sedated for their own safety....

...again.

Remind me on whether or not you wanted to let the Bush tax cuts expire. Remind me on when the debt ceiling issue was being debated and your view on the deal that proposed larger spending cuts with no tax increases, just the closing of loopholes.

My ideal solution would be a return to the last CLINTON budget, and eliminate all agencies or regulations not pertained there-in, and freeze spending there for 10 years.

The tax cuts could then remain and therefore not threaten growth because we should (since we're collecting record revenues) handle that no problem. I know this much, I saw the bush tax cuts in my tax bill that year and helped me while I was not making much money.

I still say ideally we need a flat tax for all brackets on domestically earned income no higher than 10-15% for both individual and corporate income tax with no exemptions or credits... even income based.

You willing to stand up and say that?

Sorry, but I hear this argument from the right all the time, flat tax with no deductions whatsoever, and then an unrealistically low rate. It truly is funny. Everyone with any sense who has ever proposed a flat tax rate has included a substantial deduction for everyone, and that includes Dick Armey's flat tax proposal, although his would have cut revenues to all time lows even with a 17% rate.

The bottom line is that to ever see a flat tax, it will include a standard deduction. And to be realistic, the rate will need to be around 23% on all income including capital gains. The corporate tax rate will need to be the same without all the loopholes that allow corporations to get out of paying their taxes. And last of all, we might still need to remove the cap from payroll taxes for SS, and even possibly increase the tax for Medicare.

When we talk about reducing spending in the federal government, we really need to be realistic about what we can, can't, should, and shouldn't cut. Like it or not, we are not going to get rid of SS and Medicare, however, we must reduce some of the costs of Medicare while increasing spending and revenue to support it. As for the rest of the budget, we're not going to make that many drastic changes. In the end, we are going to have to realize that federal spending is going to grow due to SS and Medicare spending. But again, we need to decide how much growth we will allow. At some point, we are going to have to decide what our limit is. I think it will be somewhere above 25%, but no more than 30% of GDP.

 

[Chris]

Remind me on whether or not you wanted to let the Bush tax cuts expire. Remind me on when the debt ceiling issue was being debated and your view on the deal that proposed larger spending cuts with no tax increases, just the closing of loopholes.

My ideal solution would be a return to the last CLINTON budget, and eliminate all agencies or regulations not pertained there-in, and freeze spending there for 10 years.

The tax cuts could then remain and therefore not threaten growth because we should (since we're collecting record revenues) handle that no problem. I know this much, I saw the bush tax cuts in my tax bill that year and helped me while I was not making much money.

I still say ideally we need a flat tax for all brackets on domestically earned income no higher than 10-15% for both individual and corporate income tax with no exemptions or credits... even income based.

You willing to stand up and say that?

Sorry, but I hear this argument from the right all the time, flat tax with no deductions whatsoever, and then an unrealistically low rate. It truly is funny. Everyone with any sense who has ever proposed a flat tax rate has included a substantial deduction for everyone, and that includes Dick Armey's flat tax proposal, although his would have cut revenues to all time lows even with a 17% rate.

The bottom line is that to ever see a flat tax, it will include a standard deduction. And to be realistic, the rate will need to be around 23% on all income including capital gains. The corporate tax rate will need to be the same without all the loopholes that allow corporations to get out of paying their taxes. And last of all, we might still need to remove the cap from payroll taxes for SS, and even possibly increase the tax for Medicare.

When we talk about reducing spending in the federal government, we really need to be realistic about what we can, can't, should, and shouldn't cut. Like it or not, we are not going to get rid of SS and Medicare, however, we must reduce some of the costs of Medicare while increasing spending and revenue to support it. As for the rest of the budget, we're not going to make that many drastic changes. In the end, we are going to have to realize that federal spending is going to grow due to SS and Medicare spending. But again, we need to decide how much growth we will allow. At some point, we are going to have to decide what our limit is. I think it will be somewhere above 25%, but no more than 30% of GDP.

A reasonable intelligent post.

Wait....did I log into the wrong board?

 

[edjax1952]

The original intent of this post was to debunk the notion that 50% of people were not paying taxes. It is already evident that they do pay taxes but get endowments to exceed their taxes.

You're only including "endowments" made through the IRS. Seems like an arbitrary distinction. For instance, a Pell Grant is an "endowment" - but you don't get it through the IRS. The same with farm subsidies.

I endorse Pell Grants as they do help with educating the general public. Farm subsidies are a subject for another post. I have lived long enough to remember when farm subsidies began to be a guiding force in our economy. That was in the '60's when the government started paying farmers not to grow certian crops to give a level playing field in the world market to other countries. Now we buy most of our groceries from other countries instead of local farmers and have mostly corporate farms here in the US who are "in line with" government policy and are growing only what the government endorses or what they can profit from because of world prices that have been manipulated by subsidies. The small farmer is a thing of the past. This is not only sad but it rules out farming for many small business men with a tendency and talent for growing crops.

 

[edjax1952]

The original intent of this post was to debunk the notion that 50% of people were not paying taxes. It is already evident that they do pay taxes but get endowments to exceed their taxes.

You're only including "endowments" made through the IRS. Seems like an arbitrary distinction. For instance, a Pell Grant is an "endowment" - but you don't get it through the IRS. The same with farm subsidies.

I endorse Pell Grants for education as they do help with educating the general public. Farm subsidies are a subject for another post. I have lived long enough to remember when farm subsidies began to be a guiding force in our economy. That was in the '60's when the government started paying farmers not to grow certian crops to give a level playing field in the world market to other countries. Now we buy most of our groceries from other countries instead of local farmers and have mostly corporate farms here in the US who are "in line with" government policy and are growing only what the government endorses or what they can profit from because of world prices that have been manipulated by subsidies. The small farmer is a thing of the past. This is not only sad but it rules out farming for many small business men with a tendency and talent for growing crops.

Besides all that, subsidies and pell grants are not an endowment. They are payment as an incentive or a reward for doing, or not doing, something the govenment has decided to make a pet project.

 

[editec]

50% of the American public is POOR.

Get used to that and expect it to only get worse.

 

[OohPooPahDoo]

I endorse Pell Grants as they do help with educating the general public.

And education tax credits do not?

 

[OohPooPahDoo]

They are payment as an incentive or a reward for doing, or not doing, something the govenment has decided to make a pet project.

So is the Earned Income Tax Credit.

Your views are woefully inconsistent with one another. The idea that an education tax credit is bad - but if we took the same credit, and instead of administering it through the IRS, administered it through the Department of Education - it would all of a sudden be good - is absurd. And your assertion that the EITC is not government's attempt to entice people off the welfare roles into getting jobs is just plain wrong, that was its intent from the beginning. Ask Reagan, who said the EITC is "the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress."

 

[OohPooPahDoo]

50% of the American public is POOR.

Get used to that and expect it to only get worse.

Its closer to 15%.

Over 1/3 of zero-tax filers are under 25.
Over 1/2 of zero-tax filers younger than 35.
Over 3/4 of zero-tax filers are younger than 45.

Zero-tax filers in 2004 will be overwhelmingly young. Looking at the age of the primary breadwinner on these tax returns, only 22 percent are 45 years old or older. More than one-third (36 percent) are younger than age 25, and 56 percent are younger than age 35. Interestingly, there is a large cluster of households (22.4 percent) where the principal wage earner is between the ages of 35 and 44. Most likely, these are modest-income families who are benefitting most from the increased value of the child credit to $1,000.

The Tax Foundation - The Growing Class of Americans Who Pay No Federal Income Taxes


Looks to me like the characterization of a zero-tax filer as a leach on government isn't exactly honest. If a person pays negative taxes when they are young but then, as they get older and their income increases, they begin to pay positive taxes to the point they become net tax contributors - how are they a leach?


The 18 year old student working at Baskin Robins who gets education credits and EITC and pays negative net taxes could one day become a taxpayer paying millions in taxes.

 

[edjax1952]

They are payment as an incentive or a reward for doing, or not doing, something the govenment has decided to make a pet project.

So is the Earned Income Tax Credit.

Your views are woefully inconsistent with one another. The idea that an education tax credit is bad - but if we took the same credit, and instead of administering it through the IRS, administered it through the Department of Education - it would all of a sudden be good - is absurd. And your assertion that the EITC is not government's attempt to entice people off the welfare roles into getting jobs is just plain wrong, that was its intent from the beginning. Ask Reagan, who said the EITC is "the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress."

Oooh Pooo on all your PahDoo You have taken simple ascertions and turned them into specific attacts on speciric targets. This post is about whether 50% of the people are not paying taxes and how that came about. If you want to bait an switch into other topics, go to another post and use all your intelectual BS to maneuver the topic to your desired field. I have already stated that those topics are for another post.

 

[editec]

Every billionaire pays the SAME RATE of taxes as the POOR do, folks.

They just pay more taxes on the money they make ABOVE the incomes that the poor people pay, too.

Sure it must truly suck to be a billionaire, eh?

That's why so many billionaires are choosing to become like the lucky poor folk, right?

 

[Big Fitz]

Your record with records is highly suspect. So... where'd you get this 'reliable' information?

 

[Big Fitz]

SOI Tax Stats - Collections and Refunds, by Type of Tax - IRS Data Book Table 1

The excel file from the IRS records is found here under 2010. Amounts in Thousands of Dollars

Business income tax Total: 277,937,220

Corporations: 277,473,918
Tax-exempt organization unrelated business income tax : 463,302

Individual and estate and trust income tax [4, 5] (Total): 1,175,989,528

Individual income tax withheld : 899,588,661
Individual income tax payments [6] : 264,098,927
Estate and trust income tax : 12,301,939

Employment taxes (Total) : 824,188,337

Old-Age, Survivors, Disability,
and Hospital Insurance (OASDHI), total [5] : 812,997,371
Federal Insurance Contributions Act (FICA) : 761,734,808 Self-Employment Insurance Contributions Act (SECA): 51,262,563 Unemployment insurance: 6,542,861
Railroad retirement : 4,648,105

Now for how much do we then refund?

Total Refunds: 1,877,753,005

Business Income tax Total Refunds: 179,598,611

Individual and estate and trust income tax Total Refunds : 814,015,325

Employment Tax Total Refunds : 819,972,289

Estate/Gift Tax Total Refunds : 18,842,767

So we collect 2.3 Trillion and give back 1.8? Who gets all this largess that we can freely give it out? Don't we have a budget crisis going on? Aren't we so far in debt now our Great Grandchildren will be paying this off till THEY have grand children? Just ending the redistribution of wealth, unfairly, from rich to poor, for the sake of your own bleeding heart who'd rather be generous with the money of others, than your own?

 

[OohPooPahDoo]

They are payment as an incentive or a reward for doing, or not doing, something the govenment has decided to make a pet project.

So is the Earned Income Tax Credit.

Your views are woefully inconsistent with one another. The idea that an education tax credit is bad - but if we took the same credit, and instead of administering it through the IRS, administered it through the Department of Education - it would all of a sudden be good - is absurd. And your assertion that the EITC is not government's attempt to entice people off the welfare roles into getting jobs is just plain wrong, that was its intent from the beginning. Ask Reagan, who said the EITC is "the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress."

Oooh Pooo on all your PahDoo You have taken simple ascertions and turned them into specific attacts on speciric targets. This post is about whether 50% of the people are not paying taxes and how that came about. If you want to bait an switch into other topics, go to another post and use all your intelectual BS to maneuver the topic to your desired field. I have already stated that those topics are for another post.

So education credits through the IRS - bad - but Pell Grants - good?
Yes or no? And if no, why?

 

[OohPooPahDoo]

Your record with records is highly suspect. So... where'd you get this 'reliable' information?

If you copy the link of the image you'll see its Business Insider.

 

[OohPooPahDoo]

So we collect 2.3 Trillion and give back 1.8? Who gets all this largess that we can freely give it out? Don't we have a budget crisis going on? Aren't we so far in debt now our Great Grandchildren will be paying this off till THEY have grand children? Just ending the redistribution of wealth, unfairly, from rich to poor, for the sake of your own bleeding heart who'd rather be generous with the money of others, than your own?

You'd prefer people have to break into your home to get food and milk?

 

[Chris]

Your record with records is highly suspect. So... where'd you get this 'reliable' information?

My record is rock solid.

Sorry the truth doesn't fit your worldview.

Wealth And Inequality In America

 

[Chris]

SOI Tax Stats - Collections and Refunds, by Type of Tax - IRS Data Book Table 1

The excel file from the IRS records is found here under 2010. Amounts in Thousands of Dollars

Business income tax Total: 277,937,220

Corporations: 277,473,918
Tax-exempt organization unrelated business income tax : 463,302

Individual and estate and trust income tax [4, 5] (Total): 1,175,989,528

Individual income tax withheld : 899,588,661
Individual income tax payments [6] : 264,098,927
Estate and trust income tax : 12,301,939

Employment taxes (Total) : 824,188,337

Old-Age, Survivors, Disability,
and Hospital Insurance (OASDHI), total [5] : 812,997,371
Federal Insurance Contributions Act (FICA) : 761,734,808 Self-Employment Insurance Contributions Act (SECA): 51,262,563 Unemployment insurance: 6,542,861
Railroad retirement : 4,648,105

Now for how much do we then refund?

Total Refunds: 1,877,753,005

Business Income tax Total Refunds: 179,598,611

Individual and estate and trust income tax Total Refunds : 814,015,325

Employment Tax Total Refunds : 819,972,289

Estate/Gift Tax Total Refunds : 18,842,767

So we collect 2.3 Trillion and give back 1.8? Who gets all this largess that we can freely give it out? Don't we have a budget crisis going on? Aren't we so far in debt now our Great Grandchildren will be paying this off till THEY have grand children? Just ending the redistribution of wealth, unfairly, from rich to poor, for the sake of your own bleeding heart who'd rather be generous with the money of others, than your own?

Reagan and the two Bushes lowered taxes for the rich to the point that they pay taxes at a lower rate than we do. This effectively transferred trillions of dollars from the middle class taxpayer to the wealthy.

The wealth has already been redistributed.....to the rich.

 

[Big Fitz]

So we collect 2.3 Trillion and give back 1.8? Who gets all this largess that we can freely give it out? Don't we have a budget crisis going on? Aren't we so far in debt now our Great Grandchildren will be paying this off till THEY have grand children? Just ending the redistribution of wealth, unfairly, from rich to poor, for the sake of your own bleeding heart who'd rather be generous with the money of others, than your own?

You'd prefer people have to break into your home to get food and milk?

Oh so poverty causes crime now? We're pimping that line now? Bernie Madoff anyone?