Saturday, November 01, 2008

How many don't pay income taxes?

I've seen a number of figures of the percentage of Americans who don't pay income taxes. Like in the mid-40s say the Republicans.

Googling brought this article from The Tax Foundation

During 2006, Tax Foundation economists estimate that roughly 43.4 million tax returns, representing 91 million individuals, will face a zero or negative tax liability. That's out of a total of 136 million federal tax returns that will be filed. Adding to this figure the 15 million households and individuals who file no tax return at all, roughly 121 million Americans—or 41 percent of the U.S. population—will be completely outside the federal income tax system in 2006.1 This total includes those who pay no tax, and those who pay some tax upfront and are later refunded the full amount of the tax paid or more.

And this article from Wikipedia

According to a 2007 report by the Statistics of Income division of the Internal Revenue Service,[5] in 2006 the Internal Revenue Service received 134,372,678 individual income tax returns, of which 90,593,081 (67.42%) showed that they paid or owed federal income tax for 2005. That is, 32.58% of those Americans who filed income tax returns did not owe any federal income tax at all for 2005.

However, the federal income tax is only one of several taxes Americans pay. Other taxes, like excise taxes, sales taxes, and especially the payroll tax (a.k.a. FICA), are regressive — that is, the poor pay them at a higher rate relative to their income than do the non-poor. Just because somebody does not pay any federal income tax does not mean that they are part of a “non-taxpaying class,” or even that they pay a smaller percentage of their income in taxes than someone who does pay federal income tax.

Who are these lucky duckies? They are the beneficiaries of tax policies that have expanded the personal exemption and standard deduction and targeted certain voter groups by introducing a welter of tax credits for things like child care and education. When these escape hatches are figured against income, the result is either a zero liability or a liability that represents a tiny percentage of income.

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Didn't realize that there were so many "poor" people in this country. So the Republican solution is to give more money to the rich corporations so they can create more jobs resulting in less poor people. This is trickle-down economics. The question is whether the corporations will actually create more jobs or keep the money and become more rich. Probably both.

The alternative is to continue these "handouts" to the economically challenged which the conservatives say would reduce the incentive to work harder to get out of their situation.

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