Big Government's Best Friends: Nontaxpayer
Taxes: The proportion of those paying no income taxes continues to hit higher highs — a trend that will ultimately make lowering taxes and reducing government impossible.For decades, "fairness" has been liberal Democrats' outcry against demands for lower taxes. The rich, President Obama endlessly contends, don't pay "their fair share."
It's about as far from the truth as you can get. As the Congressional Budget Office showed in a new report on the distribution of household income and federal taxes, the rich are getting hit by the taxman harder than ever.
As CNBC reporter Robert Frank put it, the top 1% that Obama complains about "paid an average effective tax rate of 28.9% on their income — far more than any other group, and more than twice the average effective rate of the middle class, who paid 11% on average."
Beyond that, however, is the fact that more Americans who are nowhere near to being rich are paying no taxes at all on the money they take in — which means they have no interest in getting our ever-expanding government leviathan under control.
A new study from the Tax Foundation found the number of those filing tax returns who pay no income taxes now numbers over 58 million, amounting to a staggering 41% of all tax returns. Compare that with 1990, when only about 21% of tax returns were found to have no tax liability.
What's more, the median income of these nonpayers has increased by 40% in just nine years. "The threshold at which a typical married couple with two children will likely be a nonpayer is now $47,000," the Tax Foundation found.
The primary reason? Big government's tentacles, in the form of cash payments via the soaring expansion of refundable tax credits. "In 1990, the combined value of these credits was roughly $20 billion after adjusting for inflation," the study notes. By 2000, it was $46.5 billion.
"A decade later," however, "the combined budgetary cost of both the basic and refundable tax credits reached a remarkable $224 billion in 2010."
As the foundation's Scott Hodge cautions, "These credits not only have a major budgetary cost — both in terms of the lost revenue and the outlay cost for the refundable portion — they undermine the financial stability of the government by narrowing the tax base, and disconnect people from the basic cost of government."
A tax-cut-oriented simplification of the IRS code — so urgently needed today — will soon be politically impossible because of so many millions off the income-tax rolls, an increasing number of them middle-class.
People who aren't paying taxes, yet who are enjoying government dependency in various areas of their lives, aren't going to give the time of day to politicians who seek to cut taxes.
http://news.investors.com/articleprint/619029/201207201838/increase-in-nonpayers-of-taxes-spells-trouble.aspx
