This year’s Index of Dependence on Government presented startling findings about the sharp increase of Americans who rely on the federal government for housing, food, income, student aid or other assistance.
Another eye-popping number was the percentage of Americans who don’t pay income taxes, which now accounts for nearly half of the U.S. population. Meanwhile, most of that population receives generous federal benefits.
“One of the most worrying trends in the Index is the coinciding growth in the non-taxpaying public,” wrote Heritage authors Bill Beach and Patrick Tyrrell. “The percentage of people who do not pay federal income taxes, and who are not claimed as dependents by someone who does pay them, jumped from 14.8 percent in 1984 to 49.5 percent in 2009.”
That means 151.7 million Americans paid nothing in 2009. By comparison, 34.8 million tax filers paid no taxes in 1984.
The rapid growth of Americans who don’t pay income taxes is particularly alarming for the fate of the American form of government, Beach and Tyrrell warned. Coupled with higher spending on government programs, it is already proving to be a major fiscal challenge.
“This trend should concern everyone who supports America’s republican form of government,” Beach and Tyrrell wrote. “If the citizens’ representatives are elected by an increasing percentage of voters who pay no income tax, how long will it be before these representatives respond more to demands for yet more entitlements and subsidies from non-payers than to the pleas of taxpayers to exercise greater spending prudence?”
(Source: Heritage)
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4 Responses
Not really “no” tax. The article ignores the Federal payroll tax which is IN ADDITION TO the graduate income tax, and covers “earned” income up to about $100K/person.
Excluding those in the group who neither income nor assets (and will stay be paying a sales tax in almost all states), the half of the country who pay no income tax still pay a 15% flat tat on all earned income, meaning that even if they are in the “zero” bracket for the Federal income tax, they still pay the same overall rate as a “millionaire” who has no wages and salaries income, but is living off investments. The people with the highest income are those earning roughly $100K per year who pay the full 15% payroll tax and the Federal income tax (after $100K the payroll tax rate starts to fall).
The only candidate who discussed this issue was Herman Cain who proposed a new tax system that abolished the payroll tax.
akuperma, you have a good point but you’re confusing self-employment tax with so-called payroll tax. Payroll tax consists of FICA and Medicare, and it used to total 7.65%. Self-employment tax was twice that, since both the employer and employee shares are paid by those who are self-employed.
Another way the article is misleading is that many states have state income taxes, and a lot of people who don’t pay Federal income tax do pay state income tax.
The payroll tax is paid by both the employer and employee but self-employed (meaning schedule C people, many of which are “contract” employees, meaning self-employed in name only) get the bill for the whole amount, and since to an employer the payment is part of the cost of employment, it is consider renumeration to the employee by the employer.
The Washington Post (online) has an article “Our unequal tax system, in one HTML table ” showing how bizare the system is. It’s based on a table issued by the Treasury. It shows the overall taxes are overall progressive, but with wide disparities at every income level, e.g. the people in the 10% based on rate paid of the bottom fifth of all taxpayers based on income pay a higher rate the bottom tenth based on rate paid of the top fifth of all taxpayers based on income. Overall though, there is a correlations between the rate that most people pay and their income – on the average.
And Obama says that the millionairs aren’t paying their fair share? They’re just about the only ones paying anything at all