45% of US households paid no federal tax
Congress may be ready to talk tax reform, but are Americans ready to talk about ending tax breaks that save them money?
Most of America's taxpayers finished up their federal tax returns April 18.
But a Washington, D.C., tax think tank says that for tax year 2010 almost half of us don't owe the federal government any income taxes.
Around 45% of U.S. households, or about 69 million, will end up in this envious tax position, say Tax Policy Center researchers. Some of those folks will even get money back from Uncle Sam.
Percentage points-wise, that's slightly fewer folks who don't owe the IRS than in 2009. That year, the Tax Policy Center estimated that around 47% didn't owe income taxes.
Still, a 2% shift won't make much difference to your tax disposition if you looked at line 60 of your Form 1040 (or line 37 of 1040A or line 11 of 1040EZ) and saw what you owed.
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But before you head off ranting about the huge number of folks freeloading while you're handing over your hard-earned dollars, take a breath.
We're talking only income tax.
Most of the no-tax households paid other taxes, such as state and local income taxes, along with property and sales taxes.
At the federal level, they also forked over FICA payroll taxes to pay for Social Security and Medicare.
Is it really time for tax reform?
So why am I mentioning the non-tax folks now? Because their existence can be useful in talking about comprehensive tax reform.
Congress says it's really, finally ready to have this tough discussion.
But are we taxpayers?
The main reason that so many folks don't owe the IRS or get money back is because they are recipients of the current tax system's welfare -- and I use that term in the broadest possible sense -- structure.
Yes, many in the non-tax group are lower income earners, but many middle-class taxpayers also benefit under our tax code. Maybe we don't end up zeroing out our tax bill, but we definitely use the system to trim our taxes as much as possible.
Another tax policy group, the Tax Foundation, also has looked at who pays -- and gets back -- what amount of taxes from the federal government.
"Over the past two decades, lawmakers have increasingly asked the tax code to direct all manner of social and economic objectives, such as encouraging people to buy hybrid vehicles, turn corn into gasoline, save more for retirement, purchase health insurance, buy a home, replace the home's windows, adopt children, put them in daycare, take care of Grandma, buy bonds, spend more on research, purchase school supplies, go to college, invest in historic buildings, and the list goes on," says Scott Hodge, president of the Tax Foundation in the group's spring newsletter.
"Thanks to the generosity of credits and deductions in the code a record 52 million, or 36% of all filers, pay no income taxes and are off the tax rolls," continues Hodge. "They have no 'skin in the game.' Many Americans today look to the IRS as a source of income thanks to the $100 billion in refundable tax credits paid out each year."
And he also notes that it's not just us individual taxpayers. "Sadly, many companies and industries are now looking to the IRS as a source of income, too," says Hodge, referencing General Electric's ability to get a $3.2 billion corporate tax refund for 2010.
Hodge discussed some of the tax credits that can produce a refund even when the taxpayer has no IRS bill in testimony back in March before the Senate Budget Committee hearing on Distribution and Efficiency of Spending in the Tax Code.
Tax breaks for all
But these aren't the only tax expenditures that benefit many of us to the detriment of the the U.S. Treasury's bottom line. (See chart.)
And that brings me back to my earlier question: Are we taxpayers willing to talk seriously about tax reform?
We all say we want to pay fewer taxes, which usually means we want lower tax rates.
And we also want a system we view as fair, which typically means that everyone, individual and corporate, pays their share.
But to get those lower rates and revamped tax system and still keep the government running in some form, most of us will likely have to give up a current tax break or two that we really, really like.
Even with the recent Tax Day damage still fresh in our minds, I'm not sure we're ready to do that just yet.
Those who DID pay income taxes paid "other taxes" TOO...so DON'T take a breath, and DO go back to ranting about the huge number of folks freeloading while you're handing over your hard-earned dollars.
5% for individuals/couples filing jointly
10% for corporations.
This way everyone pays something and cannot use loopholes to get themselves to 0, if they do they still pay 5 or 10%
STOP Tax deducations after two babies: and no more EARNED INCOME CREDIT!
How can this society via the greedy deceptive pathetically inept Bureaucratic Government on all levels hint at any environmental issues while NUMBERS USA make pollution and kill Planet Earth...while simultaneously rewarding Heathen Breeding via sperm donor exponentials from womb to tomb on the backs of diminishing working US Citizens of Generations as taxpayers?
Paradox of degredation in action...taking us down and out...
WELFARE wouldn't exist for whores if they knew they were not going to get public extortion for breeding--and the males would have to pay or be castrated!
Plus, the whores coming across from Mexico which is 2/3
'along the US population increase would have no reason to enter the USA because they wouldn't be rewarded.
Our society is taking a dive because there are more births from heathen breeders via sperm donor exponentials than committed adults as husband and wife with something to give not just DNA sperm sampling around...like the Duggars of Tennessee who should have been sterilized after No.2! and many more like Sullemon; Kate n John; on and on.
Kansas have 350 of one male and female who came to the USA illegally and has never paid for any of their births and keep getting rewarded on the backs of responsible others.
H E L L is filling up with selfish, ignorant greedy two-leggeds!
Everyone who uses the services such as libraries, streets, police officers, fire fighters, schools,parks, and etc need to pay their fair share. This means everyone. No free ride.
If the government changed the way taxes are paid taking a 10% cut right off the top of
everyone's earnings, then there would be no more 45% not paying but instead 100% participation of each and every American citizen. Gee whiz think of it Everyone rightfully
becoming a true and contributing member of this big country of ours!!!!!
Everyone who uses the services such as libraries, streets, police officers, fire fighters, schools,parks, and etc need to pay their fair share. This means everyone. No free ride. If the government changed the way taxes are paid taking a 10% cut right off the top of everyone's earnings, then there would be no more 45% not paying but instead 100% participation of each and every American citizen. Gee whiz think of it Everyone rightfully
becoming a true and contributing member of this big country of ours!!!!!
People are voting this comment up. *SERIOUSLY*
It's a good thing the federal government doesn't pay for libraries, streets, police, firefighters, schools, parks.
45% have a net federal *income* tax of 0. Your *STATE and LOCAL and PROPERTY* taxes pay for all the things you are talking about.
Title is wrong. Says "Federal Tax" should say "Federal Income Tax"
FICA taxes are federal taxes. And if you're working, you're paying something like 7%.
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