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

[chinaco]

I believe part of that is due to the recession (people out of work). But it that number will increase at boomers retire.

That is part of the reason for Volcker's VAT or Energy tax. It ensures some of the tax bill is based on consumption for all of the population. We are getting ready to enter a time where many people are paying low/no income taxes, yet have money to spend.

 

[Marc]

The problem is the Earned Income Credit (EIC). Too many people know exactly how much money they can earn and how many kids they have in order to maximize thier check FROM the government. Kids are parsed out to "parents" in order to maximize EIC across family units. People work only part year in order not to exceed income limits. If, as a tax preparer, you identify that their income is too high or that the kids are not deductible on their return and they will just leave and go to another tax preparer with the "right" answers. Now, I imagine they invest in free software and game the system even more.

I agree that FICA and Medicare are taxes on all wage earners including those that don't pay FIT; however, those are investments in our "own" accounts.

Marc

 

[donheff]

The problem is the Earned Income Credit (EIC). Too many people know exactly how much money they can earn and how many kids they have in order to maximize thier check FROM the government. Kids are parsed out to "parents" in order to maximize EIC across family units. People work only part year in order not to exceed income limits. If, as a tax preparer, you identify that their income is too high or that the kids are not deductible on their return and they will just leave and go to another tax preparer with the "right" answers. Now, I imagine they invest in free software and game the system even more.

I agree that FICA and Medicare are taxes on all wage earners including those that don't pay FIT; however, those are investments in our "own" accounts.

Marc

At first I was tempted to ridicule this post - all of these marginalized poor people are conspiring with open source software to organize their lives around a small tax credit. Yah, right. But then I realized that there are undoubtedly a few very street smart, probably criminally inclined people doing precisely that to supplement their off the books criminal incomes. So why are you focused on these few losers who are picking pennies up from the margins of our society instead of worrying about the real parasites who ate our lunch as they nearly destroyed our economy?

 

[youbet]

At first I was tempted to ridicule this post - all of these marginalized poor people are conspiring with open source software to organize their lives around a small tax credit. Yah, right. But then I realized that there are undoubtedly a few very street smart, probably criminally inclined people doing precisely that to supplement their off the books criminal incomes. So why are you focused on these few losers who are picking pennies up from the margins of our society instead of worrying about the real parasites who ate our lunch as they nearly destroyed our economy?

It sounds like you are condoning tax cheats as long as there are others who are commiting more serious crimes.

 

[donheff]

It sounds like you are condoning tax cheats as long as there are others who are committing more serious crimes.

Not condoning tax cheats at all. I was questioning the focus on these very few zero tax tax cheats. The vast majority of the poor are not organizing their lives around some fruitless attempt to fraudulently get a tax credit. The few who may be are not worth getting bent out of shape about. Those few are not a major cause of our national problems. It is like the old "welfare queens" deal. Sure there are a few of these jerks but we have much bigger fish to fry - why all the angst about these few crooks buried among the poor?

 

[haha]

So why are you focused on these few losers who are picking pennies up from the margins of our society instead of worrying about the real parasites who ate our lunch as they nearly destroyed our economy?

Plenty of villians of all stripes to focus on!

Ha

 

[Rustic23]

I believe the tax paying population is pair shaped, with very few really rich folks at the top, a lot of folks in the middle, and a bunch down at the bottom, at least more that at the top. Now if you believe that people, with some exceptions, do what most benefits them, then it is obvious that the folks at or near the bottom are going to vote for politicians that cater to them.

None of us have any real control over our elected officials other than political contributions and the vote. Other than that they are free to do what ever is best for them. That seems to be take just enough from the rich so they don't bolt, and give just enough to the poor so they vote. There may be a public official that truly cares for the poor, however most of their tax returns don't indicate it, but if you had to show a check stub to the government in order to vote, IMHO, things would change in a hurry!

 

[haha]

but if you had to show a check stub to the government in order to vote, IMHO, things would change in a hurry!

This bit of reality may be a little too street for the ER.org crowd. Our understanding of human behavior would never recognize such crassness, as we ourselves are very, very pure of heart.

Intersting that much of the structure of our laws and social engineering is nevertheless based on this same understanding of human behavior- that people rationally respond to incentives in a manner to maximize their gains and minimize their losses.

Ha

 

[flyfishnevada]

At first I was tempted to ridicule this post - all of these marginalized poor people are conspiring with open source software to organize their lives around a small tax credit. Yah, right. But then I realized that there are undoubtedly a few very street smart, probably criminally inclined people doing precisely that to supplement their off the books criminal incomes. So why are you focused on these few losers who are picking pennies up from the margins of our society instead of worrying about the real parasites who ate our lunch as they nearly destroyed our economy?

Heck, I know two people right now that have been on extended unemployment, but work under the table. Not only are they taking unemployment while they have a job, but they are paying no federal income tax on their earnings.

I don't blame the folks that are getting tax breaks and credits. They didn't make the rules. I blame the government for setting up such a tortuously complicated system full of loopholes and inequities. Joe Sixpack just does what Turbo Tax tells him to do, not withstanding the dishonest taxpayers who exist at all levels of income. But the government is using the code to enforce its will, promote social change and get re-elected. Big business is lobbying hard to insert more loopholes and favors. The system is broken.

 

[scrabbler1]

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.

What I bolded is surely not true for those without kids. In fact, the opposite is true.

When I was looking for a place (co-op apartment) to buy, I was concerned about the property (mostly school) taxes because it would affect my ability to afford the monthly maintenance charges. Higher property taxes would cause me to ask for a lower price to buy the residence (apartment), the same way higher mortgage interest rates depress the housing market.

Similarly, if/when I sell my place, it will likely be to a single person without kids. He/she won't be concerned about the quality of the schools but the amount of property taxes he/she will have to pay for something he/she won't be using. The higher those taxes are, the less I will be able to get for my apartment.

As another poster mentioned, another example for paying a premium one can't use is buying a place close to the local commuter train station even if one doesn't use the train. My apartment (and my previous one) are close to the train which made the premium more worthwhile to me than to someone who would not be using the train.

 

[Marc]

At first I was tempted to ridicule this post - all of these marginalized poor people are conspiring with open source software to organize their lives around a small tax credit. Yah, right. But then I realized that there are undoubtedly a few very street smart, probably criminally inclined people doing precisely that to supplement their off the books criminal incomes. So why are you focused on these few losers who are picking pennies up from the margins of our society instead of worrying about the real parasites who ate our lunch as they nearly destroyed our economy?

It is not just a few. Between EIC and child care tax credit, we are giving incentives to poor people who do not have the money to properly raise children, the incentive to have children.

By the way, with the increase in the minimum wage, it will lead to fewer hours worked to keep within the sweet spot for EIC.

I have known people that lived half year in Chicago and half year in LA earning enough to hit the sweet spot but living on housing assistance in both cities.

I can't find figures but I would imagine that over $50,000,000,000 is refunded each year through the EIC.

Marc

 

[FIREd]

It is like the old "welfare queens" deal. Sure there are a few of these jerks but we have much bigger fish to fry - why all the angst about these few crooks buried among the poor?

As a European, all I can say is that the more "free money" the government gives the more "Welfare Queens" you get.

 

[Rustic23]

Just wondering. If I buy a lottery ticket, am I now paying taxes? Maybe if we had a federal lottery we could also point out all the people that are paying taxes when a discussion of federal income taxes comes around.

 

[deserat]

And somehow we still ignore the 15% in Social Security tax to pay for "the big game".......Nobody has to file a form paying their Social Security tax, they just pay it either through lower wages or a type of "garnishment". If folks had to write a check for the SS taxes owed on April 15, no one would be claiming these aren't real taxes.

Well, if you have your own business and file estimated taxes, you certainly do pay those taxes - 15.3% + FIT on net. Very interesting to see it go out the door. Oh, and the IRS will certainly send you a letter if they believe you owe them....and very quickly, I might add, even if the fault was theirs that they tried to cash the check from the wrong bank....

I believe that the closer the consumer is to actually paying for a service, the better the service - government, healthcare, commodities, insurance - anything. When it become 'invisible,' it becomes unmeasurable unless you search for it (like the VAT showing up only *after* you purchase the item on the receipt). Unfortunately, we have put in place processes which hide the costs of things, so we truly don't know what it costs us and therefore are ignorant as to whether or not the costs of what we are buying is of value to us.

 

[samclem]

Unfortunately, we have put in place processes which hide the costs of things, so we truly don't know what it costs us and therefore are ignorant as to whether or not the costs of what we are buying is of value to us.

Like mandatory income tax withholding. Before WW-II, there was no such thing, you wrote a check when you filed your return. You can bet that gets the attention of the public. Which is why we don't/can't do it anymore.

 

[unclemick]

Expand Freedom! Raise Taxes!

Great idea.

heh heh heh -

 

[samclem]

What I bolded is surely not true for those without kids. In fact, the opposite is true.

I doubt that great schools will lower your property values, whether or not you have kids.

If what you mean is that paying higher school taxes can make a property less attractive, then I can agree with that, under some circumstances.

 

[winger]

If what you mean is that paying higher school taxes can make a property less attractive, then I can agree with that, under some circumstances.

To FIRE in our early 50s, we had to look at assets and liabilities. An annual property tax bill that was quickly approaching 5 figures had to go. And you can't have the house and location without the property taxes. They were great schools, I hear. And good city services, too.

It was an easy decision.

 

[scrabbler1]

I doubt that great schools will lower your property values, whether or not you have kids.

If what you mean is that paying higher school taxes can make a property less attractive, then I can agree with that, under some circumstances.

Good (maybe) schools --> High property taxes --> higher carrying costs for affording a house or apartment --> lower selling price for the house or apartment. This is the equation for someone who does not care about the quality of the local schools but does care about the high cost of maintaining those schools.

A less attractive house or apartment will not sell for as much regardless of the reason. Remember, I won't be selling my apartment to someone who has kids so the prospective buyer won't care about the quality of the schools the same way I did not care about the quality of the schools (the same way a prospective buyer won't care that my apartment is walking distance from the local commuter train station if s/he never plans to use the train to go to work).

My 4-building co-op complex has about 6 kids who attend the local schools from the 225 units, so you can be sure that quality of the schools is not a selling point for nearly all of the residents. However, the school taxes which are most of the property taxes which is most of the monthly maintenance charges is a BIG source of complaint every year at the shareholders meeting.

 

[donheff]

My 4-building co-op complex has about 6 kids who attend the local schools from the 225 units, so you can be sure that quality of the schools is not a selling point for nearly all of the residents. However, the school taxes which are most of the property taxes which is most of the monthly maintenance charges is a BIG source of complaint every year at the shareholders meeting.

Your situation may be different, but most taxing districts are fairly large. It isn't as if this square mile is one district and the next one is another. High tax areas are generally valuable for a variety of reasons, one of them being schools. That is why you buy there - you are benefiting from the whole package. If you didn't you would look elsewhere.

 

[scrabbler1]

Your situation may be different, but most taxing districts are fairly large. It isn't as if this square mile is one district and the next one is another. High tax areas are generally valuable for a variety of reasons, one of them being schools. That is why you buy there - you are benefiting from the whole package. If you didn't you would look elsewhere.

Not where I live. The school district is about 2 square miles large, pretty typical for this area on Long Island (New York), a high-tax area of the country. And most of it is houses, not co-op apartment buildings.

I bought my place in 1989 when school taxes were not the huge problem they are today. I bought my place here despite the school taxes, not because of them. I was walking distance from the local commuter train station (I worked in New York City at the time) and the station is in a zone which has a lower fare than its neighboring areas to the east. Both of these things saved me money (for travel and for zero parking fees to use the train) and were big selling points to live here. I hope those positives will outweigh the growing negatives of the school taxes if/when I decide to sell this place.

The high taxes on Long Island have driven many people away over the years, from the elderly whose incomes don't keep up with the rising taxes to the young who can't afford to stay/return here after they graduate college ("brain drain"). [We have too many taxing jurisdictions - county, town, village, garbage, water, sewer, school - which cause our property taxes to be so high.] Thankfully, I had a good paying job so I was not forced to move away. But I know plenty of people who moved away.

There is nothing valuable about high taxes.

 

[citrine]

I make less than 30K and have paid taxes all my life. I don't mooch off the govt or expect a handout. I save my money, have a budget, and will be able to retire comfortably because of working my ass off in corporate for ten years.
I think we should pay taxes relative to our income....if I were to pay 40% of my 30K salary, I would then have the heavily depend on the government programs.
I think it's easy to be on a high pedestal with a few million in the bank....not everyone who is low income is a baby producing machine or a mooch.

 

[ERD50]

I think it's easy to be on a high pedestal with a few million in the bank....not everyone who is low income is a baby producing machine or a mooch.

Who said this? Everyone!? I think it is more accurate to say that some of us don't think we should pay for someone else's decision to become a parent.

Tax - Free Tax Tips and Free Tax Calculators - H&R Block®

BTW, a single with $30,000 wage, no dependents will pay ~ $2,280 in FIT.

MFJ $60,000 total, with two kids will pay $1,465 in FIT.

How do you feel about a couple making 2x more than you, paying less in taxes? Shouldn't they contribute their 'fair share'? Those kids are probably using more govt resources than no kids.

-ERD50

 

[metabasalt]

What anecdotal evidence? Why would make a person's values change if they paid $10 in taxes or a $100?

The hot dog analogy and the "skin in the game" slogan do not fit. The year I paid six figures in income taxes gave me no more control over what my representatives voted for than the year I paid no taxes. Hot dogs were eaten and wasted both years. And it isn't like requiring a down payment on a house so you don't skip out on the mortgage. We don't get to chose the house or the mortgage. Most of us live in the US because we were born here and very few of us can leave. We all have skin in the game.

And I still don't see any indication that poorer people care less about "fiscal responsibility" than richer people who pay federal income taxes. No indication at all. How much does the average taxpayer care about fiscal responsibility? How often does it change their voting behavior? And as I said, who can even agree on what it is? You certainly can get taxpayers complaining about taxes and wanting them lower, but that isn't necessarily fiscally responsible. It may be irresponsible.

Non-taxpayers don't vote as a block, their issues and opinions vary just ours vary. If anything can be said about the voting habits of a group, as a group very poor people tend not to vote. Paying a few bucks in taxes is not likely to change that. Why would it? They have learned that it just doesn't matter a whole lot to them who is in office.

I have no idea why people think that it is obvious that behavior would change and the political climate would change.

.

I think you're absolutely right. There is a false and unquestioned assumption here: that once people see that they're paying something they'll change how they vote or start voting for the first time. This is possible at best, and more likely will make no difference at all. Sad to say I think the majority of voters will vote against any candidate that tells them they will have to pay anything or lose anything. In my opinion there is some wishful thinking going on here that assumes, one, that people are stupid and don't know that they have skin in the game or that politics matters to them, and two, that when they do know they have skin in the game, via taxes for everybody that all of sudden they'll change their voting ways. This is wishful thinking regardless of your ideology. Both the most leftwing and the most rightwing groups have thought like this in the past only to find out that most of society wasn't really all that concerned. I wish they were more concerned but I don't believe they are. And I'd be shocked to see any candidate win who spoke to his constituents honestly. Much of the problem in Washington is really a problem of the voting or non-voting populace.

 

[haha]

Much of the problem in Washington is really a problem of the voting or non-voting populace.

I think the more non-voters the better. I would prefer one voter only- me. TV crews would follow me to the polls, and Brian Williams would interview me to find out who I chose. And can you imagine the payola?

Ha