Is it time to join the 47% of Americans who pay no taxes?

[ERD50]

I also get pretty hot under the collar at having to pay to educate other folk's [-]brats[/-] [-]spawn[/-] [-]ankle biters[/-] [-]rug rats[/-] children. ...

Then I cool down and realize that without free public education, ...

Wait right there. It is not FREE (and I know you know that )! The costs are shifted, and that is a HUGE difference. We can't have a rational discussion if we refer to it as 'free'.

our society would very likely degenerate into a dystopia like Dickens' England with gangs of uneducated urchins roving the streets causing all sorts of trouble. Our society is already stratified enough. The last thing we need is for only the rich to be able to attend school.

I don't think that is the only alternative. How about you get a bill for each kid in school - if you can't pay it becomes a loan. Wages are garnished at some progressive rate (extremely low % for low wage earners, increasing as the wage increases).

Now, with three kids I have used the public education systems for K-12. Although, I'm not so sure it was a 'benefit'. If we had true competition in our school systems, maybe the bill would be so much lower that I would be better off paying for 3*12 (36) years directly, than paying a potentially much higher bill indirectly for 60 (age 25-85 roughly) or more years? With education rising faster than general inflation, the later years will likely be a bigger hit.

Free!?

-ERD50

 

[MichaelB]

K-12 schooling is mostly paid from property taxes and supplemented with state taxes. Folks that don't want to pay this have an easy option - relocate to a low property tax location.

 

[scrabbler1]

K-12 schooling is mostly paid from property taxes and supplemented with state taxes. Folks that don't want to pay this have an easy option - relocate to a low property tax location.

I have another idea: How about allowing the creation of local kid-free zones/communities for us younger folks similar to the retirement communities for those age 55+? Without the need to build schools or hire teachers, our property taxes would drop a lot.

IOW, relocate the low property tax locations to us instead of having us relocate to them, and let us childfree folks not have to wait until we are 55 years old to gain access to them.

 

[flyfishnevada]

That "skin in the game" argument is pretty strong. Sure they pay sales, gas, snack, property, etc. taxes, but most of those are hidden, built in taxes. You don't go buy gas at $2.50 a gallon and then they slap an 18 cent tax on top. But when they get paid and no FIT is deducted or they even get a check from the government at the end of the year because of credits, why would they even contemplate voting for reducing government spending. What do they care? Heck a lot of them are getting money back or some form of assitance. They are going to vote that away? I doubt it. In fact they tend to vote for bigger government, more spending and bigger and more entitlements. They don't have to pay for it, why not?

It's been said that a democracy can only exisit until the people figure out they can vote themselves generous gifts from the treasury. Not only that, but many politicians advocate that to get re-elected. You can't have as system where the majority lives off the labor of the minority. Everyone has to pay for the ESSENTIAL functions of government. Under just about every taxing scheme I have ever seen there is some kind of personal deduction that accounts for spending on necessities and prevent a college student from making $2000 a year and paying $200 in taxes.

Fairness and equality isn't about insuring everyone gets the same pay, house, education, etc., its about insuring everyone has the same opportunity.We have that in the United States for the most part. Poor folks get out of poverty everyday, the uneducated go to school, the downtrodden rise up. That is until the government starts handing out money and spreading dependency. Why work, when you can live for free off the labor of others? It may sound compassionate, but is a form a servitude. Those receiving have no freedom, they must ask and beg and plead for their livelihood and do what the government tells them in order to be taken care of. The wealthy, the middle class have to work longer and harder to get ahead because the tax burden goes up and up. How early could we all have retired if we weren't paying for the other 30%-40% of the population to survive all these years? How much better off would they be if they worked and sacrificed to better themselves like most of us have?

 

[audreyh1]

It amazes me that people seem to remain convinced that there is some huge fixed portion of the US population (that is - the same individuals) that does not pay taxes year after year and therefore votes to keep it that way.

I suspect "this group" is more likely a breakdown of:

1. Young people, people just getting started in careers, students, part-time workers: most of these folks will likely go on to earning more money and pay Federal Income Taxes (FIT). They have a lifetime of taxpaying ahead of them.

2. Seniors - probably a big chunk of the non-tax paying crowd as these folks tend to have lower incomes. A lot of seniors get by on pretty darn low income - especially if they are only living off of social security. A lot of these folks probably paid federal taxes for several decades and would feel pretty incensed by others claiming they are "free-loaders" whatever you think of SS and Medicare.

3. The recently unemployed and underemployed. The "47% pay no FIT" article mentions that in 2007, then number was lower - 38%. So that means 9% can be directly attributed to people whose income dropped due to the recession. You would hope for most of these folks this is a temporary situation And until 2 years ago these folks WERE paying FITs. To be mad at them now due to the economy seems pretty harsh.

4. Families. Families with children get HUGE tax breaks in this country - deductions AND credits. Whether a good idea or not, that is how the tax code is currently written. I can see how this might make some people mad and seem inappropriate and maybe the room for the biggest gripe is with this group. However, for most families, these tax breaks do not last all their lives, but rather for a couple of decades.

So, I suspect if you back out the above groups, you are probably left with a fairly small "permanent" non-FIT-paying group. And whether or not they religiously vote to keep themselves that way is still a debatable question.

Audrey

 

[haha]

I really don't think we need data on things like this (and I'm big on having data), that data is hard to parse out of the other variables in any particular situation. But it should be clear to any observer that human behavior is modified by whether someone pays directly, or feels that someone else is paying and that payment is disconnected from them. I think it works at all levels from hot dogs to Federal governments.-ERD50

This is the basic axiom of economics. That is good enough for me!

Ha

 

[youbet]

I have another idea: How about allowing the creation of local kid-free zones/communities for us younger folks similar to the retirement communities for those age 55+? Without the need to build schools or hire teachers, our property taxes would drop a lot.

Even better, why not create a class of folks who do not contribute into the public educational system but then voluntarily exclude themselves from any of the benefits. For example, you don't pay any taxes towards public education, but when you need a doctor or mechanic or lawyer or plumber, etc., who benefitted form public education, you would have no access. You could simply select your service providers from those folks who did not attend any public school. You might have to dig a little harder to find service providers, but it would be worth it, right?

That seems like it would be fair.

 

[scrabbler1]

Even better, why not create a class of folks who do not contribute into the public educational system but then voluntarily exclude themselves from any of the benefits. For example, you don't pay any taxes towards public education, but when you need a doctor or mechanic or lawyer or plumber, etc., who benefitted form public education, you would have no access. You could simply select your service providers from those folks who did not attend any public school. You might have to dig a little harder to find service providers, but it would be worth it, right?

That seems like it would be fair.

Once again, using a strawman argument against those who want the funding of K-12 education to be more equitable.

From my earlier posts, I will still be paying to support the K-12 schools through my state income and other state taxes. Just not the local property tax because there would be no local schools. Should those who live in school-free retirement areas today be denied seeing a doctor who attended public schools because they don't pay local school taxes any more?

Furthermore, what I suggested above is no different from how public colleges are funded. Those who attend pay tuition. But that reduced tuition is subsidized by the taxpayers. Those who don't go to public colleges do not pay anything more than the taxpayer subsidy akin to the subsidy paid through the state income and other taxes.

Those who attend state colleges pay a far greater share of the cost than those who do not attend them. Those who attend state colleges pay a far greater share of their cost than those who attend K-12 public schools, too.

Do you suggest that I am not allowed to use a doctor who went to a state college, too, because the only way I support state colleges is through the state income and other state taxes?

 

[ERD50]

It amazes me that people seem to remain convinced that there is some huge fixed portion of the US population (that is - the same individuals) that does not pay taxes year after year and therefore votes to keep it that way.
Audrey

I agree it isn't always the same group all through their lives - but if you look at your breakdown you've got the young-generally-low-wage years, followed by two decades of child/edu credits, then finally another two decades of senior-ship.

I'd bet that a pretty large % stay in a pretty low tax group for a large % of their lives.

This is the basic axiom of economics. That is good enough for me!

Ha

Yes, I'm kind of befuddled that there is any debate. I mentioned it to my wife over dinner last night, and she said 'well, of course', and with no further prompting went on to give a couple specific examples she experienced over just the past few weeks. I'm a little afraid to approach the subject further, it's starting to sound like "is too" - "is not".

When clearly intelligent people seem to contradict what is obvious, I've found that it's probably because they just don't like what it tells them. Kind of like that old saying about how it is near impossible to convince someone of X, if that person's paycheck depends on X being false.

Even better, why not create a class of folks who do not contribute into the public educational system but then voluntarily exclude themselves from any of the benefits. For example, you don't pay any taxes towards public education, but when you need a doctor or mechanic or lawyer or plumber, etc., who benefitted form public education, you would have no access. You could simply select your service providers from those folks who did not attend any public school. You might have to dig a little harder to find service providers, but it would be worth it, right?

That seems like it would be fair.

Well, one person's opinion, but I don't think it holds. If they pay for their own education, they will charge us to cover that in the price of their products/services. For some (most?) people, that is the incentive to attain higher education or skills. That doesn't mean we can't partake of their services. We pay-as-we-go.

Widget companies might build their factory with private funds - we buy their product, right? And that cost is included. We aren't prevented from buying the product just because they didn't use public funds to build the factory, or if we didn't buy the bonds they sold to finance the construction.

I guess we could turn it around and say, if they got a public-paid education, are they are not allowed to profit from it and charge more for their higher abilities? That would be double-dipping, we the public already paid?

edit - I see scrabbler covered some of this before I submitted, oh well, you get to hear it twice

-ERD50

 

[Martha]

Yes, I'm kind of befuddled that there is any debate. I mentioned it to my wife over dinner last night, and she said 'well, of course', and with no further prompting went on to give a couple specific examples she experienced over just the past few weeks. I'm a little afraid to approach the subject further, it's starting to sound like "is too" - "is not".

When clearly intelligent people seem to contradict what is obvious, I've found that it's probably because they just don't like what it tells them. Kind of like that old saying about how it is near impossible to convince someone of X, if that person's paycheck depends on X being false.


-ERD50

Oh come on. I disagree, said why, and it isn't because I don't like what you are saying. That is mind reading and you can't read my mind.

 

[MichaelB]

So, we have

There are people that pay and people that collect.
The people that pay somehow have a greater sense of fiscal responsibility.
The people that collect are motivated to vote for more government programs
The people that collect therefore should not be involved in the decision process. (voting).
The only reason to disagree with this is “they just don't like what it tells them”

Every single person pays taxes of one sort or another. Focusing on one source of taxes but then looking at all uses and types of spending is not a legitimate argument and is flawed reasoning.

It’s not that I/we don’t like what it tells. The argument is flawed, the conclusions are not valid and there is no evidence to support the premise. It’s all based on a headline.

Note - I share most of the concerns about spending and lack of accountability. I just don't think it has anything to do with who pays income tax.

 

[ERD50]

Oh come on. I disagree, said why, and it isn't because I don't like what you are saying. That is mind reading and you can't read my mind.

The related point I made is that the analogies and slogans do not fit the facts.

OK, then please share some examples of these facts. I either missed them or misread them.

So, we have
The people that collect therefore should not be involved in the decision process. (voting).

I may have thrown that out there along the way as a somewhat tongue-in-cheek statement, but it isn't at the core of what we are saying. If you really need examples of 'skin in the game' accounting, I'll provide them later. But wow, it just seems so obvious, really.

-ERD50

 

[samclem]

It's kinda like school taxes for me. I have no children. So why do I have to pay school taxes? If someone can ever logically explain this to me, I'm all ears.
I get steamed about school taxes because I actually had to set up a special bond fund to provide top cover for this extremely high involuntary expense in my FIRE budget. I don't mind paying county property taxes because I am the recipient of county services (road plowing, waste management, LE, emergency services, etc).
But what do I get for my school taxes? Nada.

End of rant.

You do get something, and it's not limited to an abstraction (helping the next generation, getting a beter educated electorate, etc). Your property values are better if you've got good schools. We have a town near us that would be a fine place to live, but starting about 20 years ago their schools started going downhill. Underfunding, poor management, etc. Now, houses there sell fro 20% less than ones nearby but in a better school district.
I'm not suggesting that high school taxes are worth it in your case, and I'd certainly not say that money is the most important factor in producing good schools. Still, people without kids do benefit if the public schools are good.

 

[audreyh1]

I agree it isn't always the same group all through their lives - but if you look at your breakdown you've got the young-generally-low-wage years, followed by two decades of child/edu credits, then finally another two decades of senior-ship.

I'd bet that a pretty large % stay in a pretty low tax group for a large % of their lives.-ERD50

Nope - you can't convince me that for a large percentage of people the 18 to 62 age range is all taken up by low-wage years and child/edu credit years!

Audrey

 

[clifp]

Every single person pays taxes of one sort or another. Focusing on one source of taxes but then looking at all uses and types of spending is not a legitimate argument and is flawed reasoning.

It’s not that I/we don’t like what it tells. The argument is flawed, the conclusions are not valid and there is no evidence to support the premise. It’s all based on a headline.

Note - I share most of the concerns about spending and lack of accountability. I just don't think it has anything to do with who pays income tax.

I agree, the 47% don't pay taxes, is misleading for all the reason spell out on the board.

However, a big reason this argument gets made is due to the fictional way the Government treat social security. Every year when they mail my statement as say you paid in X$ (not a large number) and you earned benefits of Y$ at age 66. The government is taking part in charade as I am sure most of us know. The money all goes to Washington and with few accounting tricks can be spent anyplace. So in this context it is accurate to say 47% don't pay anything for the Dept of Defense, Energy, Interior, HEW, Education etc. Of most of the people do a lot of money into our inter-generational wealth transfer called Social Security and Medicare.

After or perhaps before we achieve world peace, I'd like to see taxes simplified so there so we pay one Federal Tax, one state tax, and one local tax. At this point in my life I don't even care that much what the basis they tax us on incomes, sales, property, etc

 

[kumquat]

It's kinda like school taxes for me. I have no children. So why do I have to pay school taxes? If someone can ever logically explain this to me, I'm all ears.
..............

End of rant.

Perhaps you are paying for the "free" (at least until after) HS education you received?

 

[flyfishnevada]

Nope - you can't convince me that for a large percentage of people the 18 to 62 age range is all taken up by low-wage years and child/edu credit years!

Audrey

Here's how they did it, according to Deloitte Tax:

The family was entitled to a standard deduction of $11,400 and four personal exemptions of $3,650 apiece, leaving a taxable income of $24,000. The federal income tax on $24,000 is $2,769.

With two children younger than 17, the family qualified for two $1,000 child tax credits. Its Making Work Pay credit was $800 because the parents were married filing jointly.

The $2,800 in credits exceeds the $2,769 in taxes, so the family makes a $31 profit from the federal income tax. That ought to take the sting out of April 15.

Associated Press Article

I agree some were students, elderly, very low income, but many were not. Obviously, some of this is likely temporary like the Making Work Pay credit, but still the article states that:

In 2007, about 38 percent of households paid no federal income tax, a figure that jumped to 49 percent in 2008, according to estimates by the Tax Policy Center.

and:

The result is a tax system that exempts almost half the country from paying for programs that benefit everyone, including national defense, public safety, infrastructure and education. It is a system in which the top 10 percent of earners -- households making an average of $366,400 in 2006 -- paid about 73 percent of the income taxes collected by the federal government.

 

[audreyh1]

It would be more accurate to say:

For 2009, the result was a tax system that exempts almost half the country from paying Federal Income Taxes

It's pretty obvious that the poor economy and reduced employment contributed to much higher numbers in 2008 and 2009, because in 2007, the number was 38%. So they can back off a little on the "almost one half" as if it were a permanent condition IMO.

I really don't know how justifiably mad we can get at those 9% underemployed who paid no taxes because they got hit by the recession.

They try to make it sound like a permanent result when clearly these statistics vary by year and the state of the economy.

We all know the top 10 percent of earners pay a huge percent of Federal Taxes. They also make a huge percent of the income. So complaining about how things are skewed to "the few" without looking at the actual tax rates paid by each income range is useless.

Audrey

 

[ERD50]

You do get something, and it's not limited to an abstraction (helping the next generation, getting a beter educated electorate, etc). Your property values are better if you've got good schools. We have a town near us that would be a fine place to live, but starting about 20 years ago their schools started going downhill. Underfunding, poor management, etc. Now, houses there sell fro 20% less than ones nearby but in a better school district.
I'm not suggesting that high school taxes are worth it in your case, and I'd certainly not say that money is the most important factor in producing good schools. Still, people without kids do benefit if the public schools are good.

Not so sure about this.

True, property values would likely be higher where there are good schools available, due to demand. But that would be true independent of whether property taxes paid for the schools, or parents paid for the schools. Just like places near the train station go for a premium, whether you take the train or not.

So while freebird5825's property values may be higher with good schools, she also paid more for the house due to that, and is paying higher taxes each year to support those schools. I'm not sure that's a great trade off, but it's tough to measure.

Another way to put that is, I guess property values would be higher if there was a shiny new BMW in 3/4 of the driveways in the neighborhood. But would you feel the increase was worth it if you paid your share of taxes to buy BMWs, and were the 1/4 that didn't get a BMW?

-ERD50

 

[freebird5825]

Perhaps you are paying for the "free" (at least until after) HS education you received?

Very good observation. It doesn't apply to me personally, since I attended private school near NYC. But that isn't really pertinent.
Another reason I get so torqued is I am single (involuntarily as a widow) and I am still expected to keep up the same level of tax payments with dual income families. No pity party invitations are being issued.
If it weren't for my own lifetime of savings and dh2b, I doubt I could continue living here on my own. It would be very tight.
I know several women in my same position, but quite a bit older, who had to give up living in their houses because of the school taxes.
School taxes are a huge annual expense ($3200) I could do without. Add another $1000 for county taxes. And I live out in the boondocks in a very modest 1977 vintage home. Not a palace by any means.
Can you tell I just wrote a big school tax check? End of rant.

 

[ERD50]

If you disagree that everyone who benefits from our country having a decent public education system should help fund it, that's fine......

Well I agree that we all benefit from it. I disagree that it is a given that the cost should be divided equally among those with and w/o students. And having three kids myself who attended public schools K-12, I am arguing on principal, this could adversely affect me economically.

My neighbors have no kids. Sure, they benefit from the general public getting an education, but why should they pay as much as the parents of those kids?

But why turn around what I said in a way that gives an intentionally dishonest representation? No need to take my words and paraphrase, restate or "turn around" so that the meaning is changed.

Well it was not an attempt to misrepresent it, I turned it around to try to understand it from another angle. So let's try again, more closely aligned:

We all benefit from having MDs available. Does that mean that we all should share in the cost of an MD's education, or should people who choose to become MDs pay that cost? Or we all benefit from the technology that engineers provide - should every engineer have his schooling paid for, etc, etc.

So I guess I don't understand why that doesn't extend down to K-12. People decide to have children, so let them take the responsibility to educate them. Obviously, as in other matters, if the parents absolutely can't afford it, it should be provided, so we don't have thugs in the streets. I still think the parents should carry the debt on their books.

Is there a flaw in that logic? People can hold different opinions on this, but I think the logic is defensible.

EDIT - excuse me, I answered the above based on what I read in the email subscription, it looks like maybe you added or edited it, at any rate the email was slightly different, so let me add this:

I guess I'm just not taking it as a given that the only way kids will get educated is if we all chip in. I think we can charge parents and get kids educated (while providing a safety net). This kind of dovetails into the 'skin in the game' threads on taxation. Maybe if parents paid the full cost, there would be a tighter loop on cost control?

-ERD50

 

[haha]

So I guess I don't understand why that doesn't extend down to K-12. People decide to have children, so let them take the responsibility to educate them. Obviously, as in other matters, if the parents absolutely can't afford it, it should be provided, so we don't have thugs in the streets. I still think the parents should carry the debt on their books.

Is there a flaw in that logic? People can hold different opinions on this, but I think the logic is defensible.

-ERD50

As a parent, I would have personally benefitted from having school tax turned into tuition fees payable by those who attend, as my children did not attend public school. So I paid twice.

However the modern US school mission is to impart some minimal degree of acculturation to a very heterogeneous group of students, many of whom do not speak English or speak it very poorly. The fact that the schools fail misreably at this task doesn't keep it from being at least theoretically correct that it is a public expense, that must be borne by the public as those who need it most would otherwise just opt out completely.


Schools are expensive, but less so than prisons.

Ha

 

[ERD50]

However the modern US school mission is to impart some minimal degree of acculturation to a very heterogeneous group of students, many of whom do not speak English or speak it very poorly. The fact that the schools fail misreably at this task doesn't keep it from being at least theoretically correct that it is a public expense, that must be borne by the public as those who need it most would otherwise just opt out completely.


Schools are expensive, but less so than prisons.

Ha

Yes, but isn't that covered by my admission that we should provide a safety net?

-ERD50

 

[ERD50]

Then why didn't you pay the full cost? I take it your argument is simply hypothetical........

Now we are back to the "I don't agree with a specific tax policy, but since those are the rules, I will still take the deduction, credit, etc." argument. And I know from previous posts that you feel the same as I do on that one.

More precisely, the (hypothetical) deal would need to be that I could pay the full cost in trade for dropping the cost of schools from my property tax bill forever (and inflation adjusted rebates from my pre-kids-in-school years). And that isn't offered, so it is hypothetical. Paying the full cost plus the full tax doesn't get me to where I was going, does it?

-ERD50

 

[Westernskies]

I think we should move November Elections to April 15th- pay income taxes and vote on the same day....