Guess what? I got my tax refund from the IRS today! $45!!!! Woohooooo!! I’m treatin’ myself to a Big Mac Value Meal!
Of course, most people who get a paycheck and have to buy stuff have taxes at least at the back of their mind all the time. They hit us from all sides. And, when the President and other elected (and some appointed) officials pass enormously expensive bills that need to be paid for, then the burden on the American taxpayer becomes even more of an issue. Income tax is, after all, the federal government’s chief revenue source — over $900 million worth in the budget year that ended last September.
So, I have a question for you. Did you ever wonder what percentage of U.S. households paid NO federal income taxes? (I’m referring to LEGAL and non-transient households on the books, of course.) Twenty-five percent, maybe? More like 30-35 percent?
According to researchers at the Tax Policy Center in Washington, the number in 2007 was 38 percent. Then, it jumped way up to 49 percent the next year! Of course, many people were making less, due to the recession, and there were some tax cuts and “rebate” checks in an attempt to help recovery efforts. For the 2009 tax year that just ended, the numbers dropped just a tad to roughly 47 percent. (At least, that was the estimate released shortly before tax day.) That’s nearly half the population!
These numbers include those whose incomes were too low to hit the minimum threshold, as well as those who manage to cancel out their total tax obligation through a combination of credits, deductions and exemptions. The Obama administration has instituted a lot of new tax credits aimed at helping low- and middle-income families. These credits, in conjunction with reduced tax rates from the Bush administration, according to consulting firm Deloitte Tax LLP, meant that a family of four (with two kids under 17) making $50,000 in 2009 did not have to pay any federal income taxes this April. Nice.
As it turns out, about 73% of federal income taxes collected in 2006 were paid by the top 10% — i.e., households earning an average $366,400. On the other end of the spectrum, the average U.S. household in the bottom 40% (financially-speaking) gets more back in tax credits than they would owe, so they actually make a profit! The IRS just sends ’em money for nothin’! (The family in the above example netted $31.) This is different from getting a tax refund, because that was your well-earned money to begin with.
I’m sympathetic to those struggling to make ends meet. Been there! (AM there, in fact.) But, does that seem right?
We all benefit from those things that federal tax revenues go to pay for. (I’m not talking about certain, nonsensical, Congressional earmarks and pork-barrel spending.) Things like infrastructure (e.g., roads & bridges, sewers, power grids), public education (don’t get me started…), emergency services (e.g, police & firefighters), national security (e.g., civil defense, armed forces, intelligence services). So, why doesn’t every citizen — indeed, every resident making money — have to contribute SOMEthing?
Yes, I know that even those who escape paying federal income tax still have to pay payroll tax, sales tax (depending on which state they are based), property taxes, excise taxes, etc. But, those are different, and they have little to do with paying for the infrastructure, national security, etc., that I mentioned above. Now, I didn’t really want to get into the larger issue of tax reform. I’ll save that for another post or two (or three) down the road. But, I did think these statistics were interesting and thought I’d pose the above question. Please give it some thought and post a comment, OK?
Now, if you’ll excuse me, I’m gonna go have my Big Mac — hold the onion. (Thank goodness Florida hasn’t imposed a junk-food tax, or “fat tax”. Yet.)