Nearly half of US households escape fed income tax

[Denny Crane]

http://finance.yahoo.com/news/Nearly-half-of-US-households-apf-1105567323.html?x=0&.v=1

Nearly half of US households escape fed income tax
Recession, new tax credits have nearly half of US households paying no federal income tax

...

About 47 percent will pay no federal income taxes at all for 2009. Either their incomes were too low, or they qualified for enough credits, deductions and exemptions to eliminate their liability. That's according to projections by the Tax Policy Center, a Washington research organization.

In recent years, credits for low- and middle-income families have grown so much that a family of four making as much as $50,000 will owe no federal income tax for 2009, as long as there are two children younger than 17, according to a separate analysis by the consulting firm Deloitte Tax.

(more at the link)

 

[44Thrilla]

I'm proud to be part of that 47%

 

[Denny Crane]

Tax the rich! Oh wait, we are only taxing the ~50% richest.

I personally think this is how it should be - half or more of the people not paying taxes at all.

Also from the article:

"The bottom 40 percent, on average, make a profit from the federal income tax, meaning they get more money in tax credits than they would otherwise owe in taxes. For those people, the government sends them a payment."

So who's up for redistributing the wealth? We already are.

 

[blazerboy30]

Clearly we need even a smaller portion of the population paying a higher percentage of the total tax burden. More redistribution. Let's concentrate on dividing the pie and giving it away for free instead of growing the pie.

[/sarcasm]

Out of those 47%, how many would be considered poor (low total earnings, low net-worth), and how many were just able to take advantage of non-fixed incomes (low taxable income, high total earnings, high net-worth)?

 

[The_Lillard_King]

So is the idea that this percentage (47%) and people recieving money from the gov't is a result of Obama's actions?

 

[Denny Crane]

Clearly we need even a smaller portion of the population paying a higher percentage of the total tax burden. More redistribution. Let's concentrate on dividing the pie and giving it away for free instead of growing the pie.

[/sarcasm]

Out of those 47%, how many would be considered poor (low total earnings, low net-worth), and how many were just able to take advantage of non-fixed incomes (low taxable income, high total earnings, high net-worth)?

From the article, it's the lowest 47% of household incomes.

The answer to your question...

Macro economists talk about 5 quintiles of household income. At 50% of the people not paying taxes, that'd be smack in the middle of the 3rd quintile. The median household income is roughly $50K. The people considered poor are below the "poverty line" which would be roughly the bottom 10% or half the bottom quintile.

 

[Denny Crane]

So is the idea that this percentage (47%) and people recieving money from the gov't is a result of Obama's actions?

Not entirely. The Reagan tax cuts removed 6M taxpayers from the rolls. Bush's tax cuts removed many more. Obama has targeted tax cuts to those not paying taxes already, and maybe some who are.

 

[OddEnormous]

I agree with these guys.

I feel terrible for the rich people.

God knows why they keep trying.

If they were poor they'd see how awesome it is!

 

[blazerboy30]

From the article, it's the lowest 47% of household incomes.

The answer to your question...

Macro economists talk about 5 quintiles of household income. At 50% of the people not paying taxes, that'd be smack in the middle of the 3rd quintile. The median household income is roughly $50K. The people considered poor are below the "poverty line" which would be roughly the bottom 10% or half the bottom quintile.

I think you missed my question. A low income, or low taxable income doesn't mean that person or household is "poor". Are there many people showing up in that 47% that actually have high net-worth, but wrote off a lot of losses this year? Is this accounting for capital gains taxes?

 

[Ed O]

So is the idea that this percentage (47%) and people recieving money from the gov't is a result of Obama's actions?

I don't know that it's Obama's fault... Bush was certainly not small government.

Personally, I am comfortable with some redistribution of wealth, but I fear that there is an inevitability here. Once entitlements are given to people (benefits granted that are not paid for) those entitlements are nearly impossible to get rid of, and when the entitlement recipients become the majority of the electorate... how can they reasonably be removed?

I don't think that entitlements/redistribution is a zero-sum game... it's not a matter of simply moving from the rich to the less rich. It has costs that include removing money that is productive to money that is not productive. If this is true, and these costs continue to be added to by an electorate that is (understandably) not too shy to turn down "free" money... then it's just a matter of time until the rich are less rich than they were and the system comes crashing down.

California is an example of this: regulations and entitlements that could be afforded when the economy was good, but now that there is a downturn the state faces economic disaster. The United States (and, indeed, most developed countries in the world) face this within our lifetime and it scares the shit out of me.

Ed O.

 

[The_Lillard_King]

Not entirely. The Reagan tax cuts removed 6M taxpayers from the rolls. Bush's tax cuts removed many more. Obama has targeted tax cuts to those not paying taxes already, and maybe some who are.

What specific tax cuts has Obama put in place to increase this number?

Couldn't this number reflect a growing number of people who either don't have jobs or are getting paid significantly less. I guess I'm not surprised by the high percentage given the economy last year.

 

[The_Lillard_King]

I don't know that it's Obama's fault... Bush was certainly not small government.

Personally, I am comfortable with some redistribution of wealth, but I fear that there is an inevitability here. Once entitlements are given to people (benefits granted that are not paid for) those entitlements are nearly impossible to get rid of, and when the entitlement recipients become the majority of the electorate... how can they reasonably be removed?

I don't think that entitlements/redistribution is a zero-sum game... it's not a matter of simply moving from the rich to the less rich. It has costs that include removing money that is productive to money that is not productive. If this is true, and these costs continue to be added to by an electorate that is (understandably) not too shy to turn down "free" money... then it's just a matter of time until the rich are less rich than they were and the system comes crashing down.

California is an example of this: regulations and entitlements that could be afforded when the economy was good, but now that there is a downturn the state faces economic disaster. The United States (and, indeed, most developed countries in the world) face this within our lifetime and it scares the shit out of me.

Ed O.

Things don't look too good do they? Factor in the state of social security and I'm wondering where our position as a nation will be in the economic world 20 years from now.

 

[MARIS61]

Let's cry for the rich some more.

It would take a lot more "redistribution of wealth" to bring the common man back up to where he was in the 60's.

Taxes are a minute part of the equation.

Bigger factors in the atttainment of the the American Dream are fair wages, affordable healthcare, affordable credit, affordable education, and zero inflation.

In my lifetime these five things have constantly been spinning down the drain with no help in sight. America is basically a caste system now.

Obviously, mandating a minimum wage comparable to the 60's (adjusting for inflation) would instantly fix the other 4 problems, and people would pay more taxes as a median family of four would make a couple hundred thousand a year.

Were this truly a Democracy and not a puppet government run by the uber-wealthy, this imbalance would never have happened.

It's simple logic, when the richest citizens eliminate the opportunity for the bulk of citizens to earn a decent living, the richest citizens are going to have to supplement the bulk of citizens.

It's called Karma, and it's a bitch.

 

[Denny Crane]

What specific tax cuts has Obama put in place to increase this number?

Couldn't this number reflect a growing number of people who either don't have jobs or are getting paid significantly less. I guess I'm not surprised by the high percentage given the economy last year.

" Less noticed were tax cuts for low- and middle-income families, which were expanded when Obama signed the massive economic recovery package last year."

 

[The_Lillard_King]

" Less noticed were tax cuts for low- and middle-income families, which were expanded when Obama signed the massive economic recovery package last year."

Thanks . . . that's was I was looking for. Wonder what those cuts were and how much that increased the percentage . . . and why can't I be included in that percentage?

 

[BLAZER PROPHET]

So the bottom half and top richest pay no taxes. That's great. Thanks, Obama.

That's why I support the flat tax. No deductions, write-offs, credits or otherwise. A flat 7% of one's income.

 

[SheedSoNasty]

Funny... this is the first year we've had to pay.

 

[The_Lillard_King]

So the bottom half and top richest pay no taxes. That's great. Thanks, Obama.

That's why I support the flat tax. No deductions, write-offs, credits or otherwise. A flat 7% of one's income.

No incentives to give to charitable organizations?

No incentives to save for children's college?

No incentives to save for retirement?

No incentives to buy a house? (write off interest)

 

[BLAZER PROPHET]

No incentives to give to charitable organizations?

No incentives to save for children's college?

No incentives to save for retirement?

No incentives to buy a house? (write off interest)

More incentive. At 7%, my tax liability for $60K per year is cut by 50%. I'd put more than I already do to charities.

So it's up to the 97% who have more disposable income if they want to contribute or not.

 

[The_Lillard_King]

More incentive. At 7%, my tax liability for $60K per year is cut by 50%. I'd put more than I already do to charities.

So it's up to the 97% who have more disposable income if they want to contribute or not.

DO you think Joe citizen will take that extra money and donate to charity. What about schooling and retirement?

My point is that I think you want a gov't that encourages college savings, buying a house and putting money away for retirement. Yes people can do taht with teh amount they save on taxes . .. but i don't think relying on that is a good idea for the future of our country.

 

[Eastoff]

FWIW:
I am a single late 20s male, I made 30k last year and I received 1K$ back from federal and 100 from Oregon. I am definitely not the rich, but probably not really poor either?

 

[Eastoff]

No incentives to give to charitable organizations?

No incentives to save for children's college?

No incentives to save for retirement?

No incentives to buy a house? (write off interest)

...
you can get college funds that are non-taxable until you take the money out.
You can get write-offs for donations
you can get non-taxable retirement funds until you take them out.
there was a first time home buyer credit of 5k or 10k I believe.

 

[blazerboy30]

Let's cry for the rich some more.

It would take a lot more "redistribution of wealth" to bring the common man back up to where he was in the 60's.

I stopped reading right here, because it has been shown to be false over and over and over...

Please show that according to real metrics, the bottom 10% of this country are worse off today than they were in the 60's.

At some point you're going to need to stop making everybody else carry the burden of your lack of intelligence.

 

[blazerboy30]

FWIW:
I am a single late 20s male, I made 30k last year and I received 1K$ back from federal and 100 from Oregon. I am definitely not the rich, but probably not really poor either?

Is that $1k net or gross?

 

[BLAZER PROPHET]

DO you think Joe citizen will take that extra money and donate to charity. What about schooling and retirement?

My point is that I think you want a gov't that encourages college savings, buying a house and putting money away for retirement. Yes people can do taht with teh amount they save on taxes . .. but i don't think relying on that is a good idea for the future of our country.

I see your point of view, but people either will or won't donate to charities. The write off is usually non existent anyway due to the rules.

I dunno, many congressmen I respect (somewhat, anyways) are much in favor of a flat tax and I think it would greatly simplify taxes, easily increase tax revenues and put a lot more money in people's hands- why is that so bad?

 

[Eastoff]

Is that $1k net or gross?

I earned 30K before taxes. I received a check for 1k$. I am a physics major, not an econ major so I don't know the difference between the two words. I will assume net is like they took out 2000$ and only gave me back 1000, so I lost a net of 1000?

 

[Eastoff]

I see your point of view, but people either will or won't donate to charities. The write off is usually non existent anyway due to the rules.

I dunno, many congressmen I respect (somewhat, anyways) are much in favor of a flat tax and I think it would greatly simplify taxes, easily increase tax revenues and put a lot more money in people's hands- why is that so bad?

Because I think it is skewed to help the rich from an overall standpoint. If I make 200k a year and I lose 100k I still have 100k which is quite livable IMO. If I make 20K a year and lose 10k I only have 10k to live off. That is not livable.

 

[blazerboy30]

I earned 30K before taxes. I received a check for 1k$. I am a physics major, not an econ major so I don't know the difference between the two words. I will assume net is like they took out 2000$ and only gave me back 1000, so I lost a net of 1000?

Correct.

Did you have more than $1k deducted throughout the year?

 

[blazerboy30]

Because I think it is skewed to help the rich from an overall standpoint. If I make 200k a year and I lose 100k I still have 100k which is quite livable IMO. If I make 20K a year and lose 10k I only have 10k to live off. That is not livable.

It all depends what you mean by "help" the rich. Do you mean "help" as in not having the middle class pay ~40% of their income while half the country pays zero?

 

[BLAZER PROPHET]

Because I think it is skewed to help the rich from an overall standpoint. If I make 200k a year and I lose 100k I still have 100k which is quite livable IMO. If I make 20K a year and lose 10k I only have 10k to live off. That is not livable.

A 7% tax makes less money livable.