Half of American households pay no income taxes
Filed under: Ripoffs and Scams, Tax
Sound bytes from politicians often promote class warfare... citing how evil "tax cuts for the wealthy" are and pressing for more tax relief for the lower and middle classes. Listening to them, you would think that the lower and middle classes are carrying a disproportionately high share of the tax burden, wouldn't you?Well it's time to debunk that myth with a little dose of reality. The Tax Foundation puts American income taxes in perspective with these facts. The organization's analysis of the tax laws and rates indicates that have of American households pay no income tax at all.
In fact, many millions of households actually get far more money from the federal government than they have ever paid in income taxes. A study released last year by the Tax Foundation compared the amount of taxes paid by individuals versus the value of government spending received.
The study showed that the bottom 20% of households in America receive almost $15 in federal spending for each $1 they paid in federal taxes. In contrast, the top 20% of American households received only 32 cents in federal spending for each $1 they paid in federal taxes.
Why is it this way? Lower income families often have no income tax burden under our system, and are even entitled to certain refundable credits. So if we want to put the income tax burden in perspective, this is really an important analysis. Instead of listening to politicians pander for votes with cries of a huge financial burden on the lower class taxpayers, maybe we should be standing up and asking them to be more honest with their claims.
Why is this issue coming up now? Well the proposed "tax rebate" checks are going to be given to many Americans, including those who didn't even pay any income taxes. It's not much of a "rebate" if you didn't pay taxes in the first place. It's more of a handout, and maybe we'd do everyone a favor if we called it what it is. Another step toward Socialism.
Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
Reader Comments (Page 1 of 1)
1-25-2008 @ 10:15AM
Andrew Alexander said...
One of the important functions of government is to control the distribution of wealth. Otherwise the rich continue to get rich, the poor get poorer and you end up with a feudalist society. And considering the wealthiest 1% own about 40% of the wealth, I don't think the government has been heavy handed in this regard and I don't think the wealthy are unfairly burdened.
I do agree that it is a hand out tough.
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1-25-2008 @ 12:00PM
Erwos said...
"One of the important functions of government is to control the distribution of wealth."
Really? My copy of the Constitution is strangely missing this. Maybe you think it is, but that's purely your opinion. As a libertarian, I most certainly do not agree. Stealing from the rich to give to the poor might make a good fairy tale, but it's still theft.
I totally agree with Tracy on this one (and I often do on other issues!). This "rebate" is simply welfare, and it's not a shock that the Democrats were behind the provisions giving it to people who shouldn't have gotten it. Nor is it a surprise that they were unsatisfied with the breadth of their spot welfare program, really.
I also think that the cut-off numbers are completely arbitrary. My wife and I barely snuck in, and in a couple years, almost certainly won't. We live relatively frugally, have very little debt (low-interest, too), and we're still struggling to buy a house in the area we're currently renting in. The rebate should have been a percentage of taxes paid, not a fixed amount.
1-25-2008 @ 10:42AM
Paul said...
Sure it is a handout-but a miserable small one compared to the tax breaks the top earners have received. If this government was not pouring our wealth and blood into the sands of the middle east we would have the billions to invest in our decaying infrastructure, health and education which would result in significant generation of new jobs and industries and these so-called handouts would not be a consideration.
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1-25-2008 @ 1:36PM
roostr said...
Paul,
Despite how idiotic your first sentence is (as Tracy pointed out), you do have a point in the rest of it.
1-25-2008 @ 2:25PM
Michael said...
Paul,
Your comment covers only one side of the argument. The 9/11 attacks wiped Trillions of net worth out of our economy. We haven't been attacked since---most likely due to our efforts in the Middle East. So the question becomes: What if we hadn't gone into the Middle East and we were again attacked---taking down our economy once again? So if we are going to compare "costs" let's at least consider the cost of not going into the Middle East.
1-25-2008 @ 10:49AM
Tracy Coenen said...
The tax BREAKS the top earners have gotten??? Do you not understand that the "top earners" are the ones paying almost all the taxes?
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1-25-2008 @ 11:39AM
wberroyer@aol.com said...
I couldn't agree more, The politicians in this country will lie and mis represent any issue for votes. They do it with total disreguard for the people who pay the bills,
including their salary. Whats even more amazing is that we allow it to happen. Its frightening that there is a whole generation of people running this country that only care about there soft comfortable jobs and not the country. I believe they would do anything, and I mean anything to keep their life style.
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1-25-2008 @ 2:40PM
mickey said...
I'm with Ewos on this one. My copy of the Constitution doesn't mention wealth redistribution at all.
Alexander doesn't think the wealthy have an unfair burden. They have nearly the entire burden. Why is that? Why does Alexander feel someone who is successful should pay someone who isn't?
When will we start to call Communists and Socialists exactly what they are?
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1-26-2008 @ 1:02AM
James said...
Ha, this neoliberal makes it seem like socialism is the new AIDS. Give me a break. But anyway, I digress.
If an economy is to work efficiently, money needs to change hands. This is the intent of the tax break, it is not a measure seeking mass betterment. The vast majority of the true welfare program utilizers will spend this "socialist" rebate in an expeditious manner, namely cashing it at Wal-Mart and buying some consumer goods. This money will then immediately reach the upper class (so quit your bitchin'). In five years when their plasma television is fried, they will be left with nothing. Corporate elites, on the other hand, will reap the benefits of an inflated quarterly revenue and the upper-middle class will enjoy their increased stock dividends. The rich get richer, and the poorer get to watch the Patriots superbowl celebration in excellent resolution. Social justice!
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1-26-2008 @ 7:10AM
al coholic said...
Erwos, I've tangled with you before, but this time I almost agree with you.
But this stealing from the rich thing doesn't tell the whole story. The rich are able to buy their special treatment through lobbying and campaign contributions with obvious strings attached while the poor have little clout. How else can you explain the 15% tax rich Hedge Funds pay, or the fact that Congress has the audacity to pass laws that benefit rich individuals or companies in tax matters.
That sounds like a lot like wealth redistribution to me.
As long as our Presidents and other representatives depend on money from special interests to be elected the wealthy will always have their way.
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1-31-2008 @ 2:42PM
Isabella said...
I do not believe that anyone who does not pay income taxes should get any kind of rebate, Why should they ? I happen to pay income taxes, and I resent people that pay NOTHING getting a FREE HANDOUT like that. I also understand that Illegal immigrants can get these too. I find that totally RIDICULOUS.
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2-06-2008 @ 5:01AM
Lorenkar said...
How can you say that the immigrants will receive the rebate checks as well? That's NOT true at all. Get your facts right! Immgrants do not get any medical benefits like you or I do. They have to pay for the doctors vistis or buy their own medicines, so what makes you think that they will receive these checks?
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