Why Even The 47% Who Owe No Income Taxes Want Tax Relief

Almost Half the Population Don't Have to Pay Federal Income Taxes

April 21, 2010

In the days running up to the April 15th tax filing deadline, a number of conservatives were quoting a statistic showing that 47% of the population of the United States don't pay any federal income tax.  

On its face this statistic is somewhat scary in that it implies that the productive tax paying half of the nation is carrying the other half financially.  

However, like all statistics, one has to look at it and interpret it from different angles.

Karl Marx (1818 - 1883) Public Domain Photo courtesy of WikiPedia.org  http://en.wikipedia.org/wiki/File:Karl_Marx_001.jpg
Karl Marx (1818 - 1883) Public Domain Photo courtesy of WikiPedia.org http://en.wikipedia.org/wiki/File:Karl_Marx_001.jpg

Background is Needed to Understand This Statistic

On April 13, 2010, two days before Tax Day, the New York Times came out with a closer examination in a well written article by David Leonhardt.

Despite the obligatory pitch for higher taxes on the rich, which one expects in a New York Times article, Leonhardt did a fairly good job of showing that the 47% who don't have a Federal Income tax obligation still face other taxes.

In an April 15th Wall Street Journal piece, Karl Rove made the same point that most of the 47% who owe no Federal Income taxes are still hit by other taxes.

That same April 15th evening Dick Morris, during an interview with Greta Van Susteren made the same point that the while the nature of the Federal progressive income tax excludes a growing number of people from having to pay, the nation is still awash in a sea of other Federal as well as state and local taxes so few, if any, people are totally avoiding paying taxes entirely.

A Partial List of Taxes Everyone Pays

Other taxes, which we all pay including those who do not owe Federal income taxes, include:

- 7.65% Social Security and Medicare tax on everyone's income

- state income taxes in many states (and local income taxes as well in some cities)

- 18.4 cent Federal tax on every gallon of gasoline we buy PLUS anywhere from 8 cents (Alaska) to 32.1 cents (Wisconsin) additional state tax on each gallon of gas we purchase (and, in some places, additional taxes per gallon levied by local governments).

- property taxes on our homes and, in some states other property such as cars as well.

- Federal, and often state and local, taxes on telephone calls and Internet usage

- State and local sales taxes on almost everything we purchase.

The list above is just a sample of the numerous taxes that are paid directly by Americans to the government.

There are also the numerous indirect taxes which are paid by business and then added to the price of their goods and ultimately paid by individual consumers.

Opposition to Increasing Tax Burden Growing Throughout the Population

This sea of taxes is one reason why opposition to taxes, especially the Federal income tax, is growing despite the fact that the number of people who don't have to pay Federal income taxes is also growing.

However, there is another reason why in some recent polls why as many as 78% of the people polled feel taxes are too high even though the burden of paying Federal income taxes only falls on 53% of the people and that is the fact that those who make up the 47% of those who don't owe any Federal income tax are not the same people every year.

America is a Land of Individuals and Not Social Classes

While left leaning politicians and the mainstream media continue to see the world through the lens of Karl Marx in which society consists of fixed groups of people rather than individuals, the fact is that twenty-first century America is not the same as the nineteenth century Europe in which Karl Marx lived and wrote in. Americans are not born into an economic class - proletariat or bourgeois - and find themselves condemned to remain in that class for life.

Today in the United States, both the measurement of poverty and criteria used to determine one's Federal income tax bracket is a mainly a combination of household annual income and household size. However individual annual incomes tend to fluctuate based upon both individual circumstances and changes in the nation's economy.

This means that a sizable portion of the those that make up the low income portion of the scale are in that area temporarily and those who make up that portion are not necessarily the same ones who found themselves in this area a year ago and may not be in it a year from now.
In other words, we don't have a permanent underclass like the one imagined by Karl Marx and his followers.

Tax Burden on Unemployed

A second factor to consider is that income tax brackets and, in many cases, poverty statistics, tend to focus exclusively on income and ignore things like wealth and access to financial resources.

This is how otherwise middle class or upper middle class people who lose their jobs or encounter other difficulties such as accidents or illnesses which result in their incomes temporarily dropping find themselves being classified as living below the officially defined poverty level.

Depending upon the severity and duration of the decline in their income, it is not uncommon to see media stories about people who are classified as living below the poverty level, not having any Federal income tax liability and possibly even receiving benefits such as food stamps while at the same time living in a home worth six figures, having two cars and, in general leading a middle to upper middle class life style.

Because this is not their permanent condition, they are able to make up for the loss of income by a combination of tightening their budgets and watching what they spend while at the same time either drawing down past savings or by borrowing - using credit cards, second mortgages and other types of loans - which is in effect using savings from their expected higher future income.

These people not only expect to be paying high Federal income taxes again as soon as their circumstances turn around but also experience first hand the tax burdens that are making their already difficult situation worse.

If they find a low paying job to bring in income while looking for a job at their previous higher income they will be hit with the 7.65% Social Security and Medicare tax on everything they earn.

If they turn to self-employment by doing freelance work or starting a business they will have to pay both the employer and employee portion of Social Security and Medicare which is double or 15.3% percent of their earnings.

They will also have to continue paying property taxes on their homes along with sales and other taxes.

If they resort to withdrawing money from an individual retirement account (IRA) or a 401(k) account they will have to pay a 10% penalty tax on the amount withdrawn plus have the funds withdrawn added to their income for the year and taxed at the highest income tax bracket they are in.

If they sell securities or other property for more than they paid for them they will have capital gains tax to pay.

Tax Burden Hurts Rich and Poor Alike

While the progressives continue to seek to stay in power with their class warfare and soak the rich rhetoric, the fact is that all Americans are struggling under a growing tax burden that hurts rich and poor alike.  

This is why the Tea Party movement continues to grow and attract more supporters including unemployed people who owe no Federal Income taxes this year.

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Comments 15 comments

ray medeiros profile image

ray medeiros 6 years ago from Massachusetts

Chuck, I will give you a statistic. 84% of the nations wealth and income is controlled by 20% of the very top people.

To make it easier for math...If 1% of the people owned 100% of the wealth and income wouldn't it make sense that they pay 100% of the taxes.


Angela Harris profile image

Angela Harris 6 years ago from Around the USA

This is surprising and frightening. I had no idea that many people didn't pay any income taxes at all.

No wonder my husband and I give away half of our money to taxes. (And that's NOT counting sales tax, property tax, gasoline tax, utilities, et cetera.)

Something has to be done. The working class can't keep carrying the burden for everyone.


stars439 profile image

stars439 6 years ago from Louisiana, The Magnolia and Pelican State.

Pretty good hub. God Bless


Paradise7 profile image

Paradise7 6 years ago from Upstate New York

I'm so with you here.


JON EWALL profile image

JON EWALL 6 years ago from usa

HUBBERS

IT'S ALL ABOUT SMOKE AND MIIRRORS. The politicians tell the public half of the truth and will never give you the whole truth.

Recently I saw an interview with let's call him a rich person. He stated that he works for the government on Mon, Tues and Wed. the following 2 days he works for himself Meaning the government gets 3 days of his paycheck and he gets the last 2days.

May not be true for many of our citizens but it is something to think about where our tax dollars are going to run the country.

Unemployment is 9.7% and jobs in the private sector are not there while in the public sector the unemployment rate is only 3%. Government is expanding under the Obama administration and the private sector is dying.

.


Chuck profile image

Chuck 6 years ago from Tucson, Arizona Author

Thanks to all of you for your great comments.

The Rising Glory - thanks for pointing out that those of us in the 53% who do pay Federal Income taxes also pay all of these other taxes. I didn't mean to obscure that fact. As to your other points about people who avoid paying income taxes, many of these practices are legal according to our 100,000+ page tax code which is written in the "clear" prose as the recent 1,000+ page Health Care Law which members of Congress who voted for it are still waiting for the press and lawyers to read and explain to them what they voted for. As I pointed out in my previous Hub "How Do You Feel About the Head of the IRS Being Someone Who Hasn't Paid His Taxes" ( http://hubpages.com/politics/How-Do-You-Feel-About... ) the U.S. Code (the body of Federal Law governing us) is over 1.2 million pages (with 100,000+ pages of it being the tax code) of conflicting and barely comprehensible bureaucratic gobledygook that no one understands which gives those with the resources to game the system plenty of room to legally get away with many things.

mwatkins - I totally agree with you. Another fellow and I once had a small business employing 7 people (including ourselves) and each pay day the biggest check we wrote was to the U.S. Treasury for income and payroll taxes withheld from everyone plus the businesses share of Social Security and Medicare. We did all the productive work to earn the money and the government, which did nothing to earn the money got the biggest chunk which they more than likely just wasted. Thanks for your comment.

dfager - let me clarify, the 47% who don't pay taxes are not the people whose withholding is less than the taxes they owe and who, as a result, have to write a check for the difference. The 47% are those who get all of the money withheld from their pay during the year back - none of their Federal Income tax money withheld from their paychecks during the year (or paid as estimated tax payments during the year in the case of self-employed people) is kept by the government. Further, depending upon the size of their income and family size they may qualify for the so called earned income credit which is a negative tax meaning that, in addition to not having to pay any taxes and getting all of their withholding back, they also get and extra amount, which is a percentage of their income, back from the IRS.


dfager profile image

dfager 6 years ago from Federal Way, Washington

People who don't own income tax on April 15th have still paid income taxes, they just don't owe more than what's already been deducted from their checks. Is that what the 47% means? Even in a good year, I try to have enough deducted that I don't have to pay additional tax.


mwatkins profile image

mwatkins 6 years ago from Portland, Oregon & Vancouver BC

Well done! As a bookkeeper, I've seen payroll taxes eat a company alive. In Oregon, there are 8 payroll taxes (matching taxes = soc sec, med) in addition to just those matching taxes. And the penalties on certain filing requirements are outrageous - $8,000.00 for one small company for not filing their w2-w3 timely. Combined with the economy they are being threatened with asset garnishment and additional penalties. Thanks for writing this great hub!


The Rising Glory profile image

The Rising Glory 6 years ago from California

There are a lot of variables when it comes to taxes. You pointed out the NY Times, Dick Morris and Karl Rove all stating that those not paying Federal taxes are being tax from other sources. However, the 53% paying Federal taxes are also paying those taxes. The indirect taxation can actually be the biggest and hurts the lower income folks the most. Those in the hire income brackets can afford to play the Federal tax game and lower or pay little fed taxes.

Many of the lower end who cry fowl are not as hurt as they try to make out. Many work for cash and don't report their income others like single mothers will have low income, collect earned income credit, but live (unmarried) with someone who has a good job. There are many who unfairly avoid paying taxes. Of course the reason is because we are taxed up the ying-yang.

The biggest burden falls on the honest middle class who are trying to play be the rules.


Darlene Sabella profile image

Darlene Sabella 6 years ago from Hello, my name is Toast and Jam, I live in the forest with my dog named Sam ...

There you are my writing buddy, I have missed you...now I have been so busy writing that I forget to each. Excellent hub my dear friend, and maybe this summer we will join forces again. your fan, darski


eovery profile image

eovery 6 years ago from MIddle of the Boondocks of Iowa

If it doesn't move tax it...IF it moves twice, tax it double. These guys got taxes coming and going.

Keep on hubbing!


sheila b. profile image

sheila b. 6 years ago

I'd also like to say that people who make the lower incomes and don't pay income taxes on it are still capable of seing the waste and corruption in Washington. I believe most Americans don't want their neighbors' taxes raised and the money wasted any more than they want that for themselves.


bobmnu profile image

bobmnu 6 years ago from Cumberland

Excellent Hub. You pointed out why the increase in number of people not paying taxes. In reality the number who pay no Income Tax year in and year out is probably much lower. You should be hired by the media to put this into a 30 second news bite that people could understand. Facts and not emotion. Even Bill O'Reilly could argue with you on your points.


Nan 6 years ago

I am glad you brought it out that we all pay taxes. If we buy anything we pay taxes. The problem is the local tax stays locally. In Illinois they are going to raise our taxes. The unemployment is the highest and they don't have money. They didn't manage the money when they had it, and now the jobs have gone out of the country.


Aya Katz profile image

Aya Katz 6 years ago from The Ozarks

Chuck, a very good article. I hope many people read it. The only way to avoid taxation altogether these days is to drop completely off the grid. If the tax burden isn't eased on all of us, that is what we will all have to do.

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