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

[ziggy29]

• only 220 of the top 400 were in the top marginal tax bracket.

• minimum annual income to make the top 400 = $138.8 million
​

OK, this also shows the tax system is dysfunctional.

IMO, exactly 100% of taxpayers with incomes of $138 million or more should be in the top marginal bracket -- not 55%. Presumably most of the other 45% are paying the AMT, but still....

 

[youbet]

Depends on your perspective, I guess. I was reporting on my personal experience, so for me it was kiddie edu credits.

I don't label tax credits or deductions that are available to anyone and everyone (before income phase-outs) as tax credits or deductions for families with kids. So I wouldn't count that part of your fortunate tax situation as due to kiddie credits, just due to the educational credits.

BTW, I read (sorry can't find it now) that the recession has caused a few out of work adults to use the educ tax credits to help getting some class work in that they think will help them find a job.

I'm in total agreement. I guess this is where I'm a bit confused. I don't know if you are attributing that broad-blanket to me, or speaking about some other groups of people?

I interpreted some posts, made by others, as broad brush classifying all families with kids as getting HUGE kiddie exclusive tax credits and deductions. I just thought that was a tad too broad.

$3,500 in edu credits across two kids (3 semesters only) plus $1,000 Child Tax Credit. No fancy loopholes, and I'm not including their exemptions, or any portion of contributions to Schedule A deductions or anything like that.

The way I'd look at it is that you got $1k in tax savings due to kiddie-exclusive tax credits. A couple with more income than you, say a dept manager at a retail store and a engineer making a combined $120k, would have gotten no break at all since their income would have phased the credit out.

Whether that is appropriate taxation or not is strictly judgmental and open to opinion and interpretation. I just read a few posts that I thought were implying that all families with kids get huge tax breaks. And that's not true.

We all personalize this stuff. My son and DIL with three rugrats, one with cerebral palsy, have a lot of kiddie related expenses and only had their taxes reduced by a few hundred bux due to what was left of the child care credit after phase out. When I read folks saying that there were huge kiddlie-exclusive tax breaks out there, I was optimistic that they must have overlooked something and I could save them a few bux. But, not so. Sigh.........

So the bottom line seems to be that for lower income folks, there are some kiddie-exclusive tax breaks that can save them a big percentage of their taxes, even if not huge in absolute dollars. But as you get into middle-middle class, and when you account for the fact that many of the credits folks are referring to apply to any dependent, not just minor children, it's not such a big deal.

As mentioned before, I'd be happy to eliminate it all and just have a flat tax. At 15%, you'd have paid much, much more and I would have paid about the same. Sounds good to me!

Yep, fantastic weather here in Chicagoland. Can't decide whether to cut grass, get out the kayaks or prep the camper for an overnighter........

 

[MuirWannabe]

Are they paying too much in taxes?
[/INDENT]

Yes. We are all paying too much in federal income taxes. Except the 47% who pay nothing.

 

[youbet]

This isn't about rug-rats, but...

From Top 400 Taxpayers | The Big Picture

The IRS puts out an interesting tax document each year, looking at the returns of the nations wealthiest 400 people. The most recent year of complete data is 2007, when 143 million individuals filed tax returns.
Some of the data is quite astonishing:

• The top 400 U.S. individual taxpayers got 1.59% of the nation’s household income in 2007 — 3X the p% they got in the 1990s.
• The top 400 paid 2.05% of all individual income taxes in 2007.
• Only 220 of the top 400 were in the top marginal tax bracket.
• Average tax rate of the 400 = 16.6% — the lowest since the IRS began tracking the 400 in 1992.
• Minimum annual income to make the top 400 = $138.8 million.
• Top 400 reported $137.9 billion in income; they paid $22.9 billion in federal income taxes.
• 81.3% of income was from capital gains, dividends or interest. Salaries and wages? Just 6.5%.
• The top 400 list changes from year to year: 1992-2007, it contained 3,472 different taxpayers (out of a maximum 6400).
​

And they all would still fit in Lady Astor's ballroom.

Very interesting.......

I wonder if these folks pay other income taxes indirectly. Say they own a corporation or two. Might the corporations be paying taxes that aren't counted in these numbers?

Do Bill Gates or Warren Buffet report all the income generated by their vast wealth? Or might there be trusts, corporations, etc., reporting income and paying taxes?

 

[Dreamer]

My DD and her DH received a large tax refund. They have 1 child who is my only grandchild. They bought their first house last year. They are both taking college courses part-time. Uncle Sam gave them back more money than my DS-in-Law paid in. Uncle Sam also gave him 3 shots for free also. I believe they were typhoid, anthrax and smallpox. Uncle Sam is also giving him an all expense paid trip to Afghanistan this year.

All of the above is to say that just because they are "low income", they are not figuring out how many hours they can work and still not pay income tax. At this time, they are only planning on having the 1 child. (I hope they change their minds, but that is their decision.) They are not trying to scam the government. My DS-in-law is in the Navy and works Monday thru Friday and anytime else they tell him. He worked this past Sunday from 7:00AM-7:00PM. He did not vote for Obama and he knew what could happen when he enlisted in the Navy. He is not complaining. They are young and starting out. I can see him and my DD paying FIT for many years in the future. I get tired of seeing people living in mansions that get tax deductions for their mortgage interest. There should be a cap on that IMO, if there is not. I hear about people going on business trips to exotic places and know that companies get to claim these as business expenses. People are given cruises, football tickets, etc by companies and again these are written off as business expenses. Restaurant food that is again written off as business expenses and for the most expensive places to eat. Places that the average person would never to be able to afford to eat without breaking the bank. These are some of the places that I would like to see tax changes. I do not mind seeing the so-called "kiddie tax breaks". My two children are grown, so I do not receive them myself. We are still paying for our DD's college, but don't receive a tax break, since she is married and not our dependent.

 

[dex]

Yes. We are all paying too much in federal income taxes. Except the 47% who pay nothing.

"When the people find they can vote themselves money, that will herald the end of the republic."

Benjamin Franklin Quotes/Quotations

 

[Martha]

"When the people find they can vote themselves money, that will herald the end of the republic."

Benjamin Franklin Quotes/Quotations

They can't. I have come to believe that this is a nation of corporations. We get a health reform bill for insurance companies and maybe something for some of us in four or five years (and I can hardly believe we got that much). Banks and Wallstreet get bailouts. Goldman Sachs gets offended when the feds dare call them on a scam. U.S. corporations get to close their factories, move to Mexico to make a product and then move to China. Our citizens get the huge risk of losing their jobs, with unemployment well into the double digits. Our citizens get dead end jobs, part time jobs, and loss of jobs to foreign competition. They get age discrimination. They get loss of benefits from their small employers. They lose what they thought was equity in their homes. And if they can't find a job they often feel it is their own failure. And they get to worry about whether there will be social security for them when they are old and can't work any more. And if there is a safety net some people call that voting benefits for themselves and thus somehow suspect.

The one thing I agree with the "teaparty" on is that they have the right to be pissed off. Our citizens have been screwed.

 

[ERD50]

They are not trying to scam the government.

I believe you. When I paid $24 in FIT in 2008 I wasn't trying trying (and I didn't) scam anyone either. I just filled out the tax forms to the best of my ability. But I still don't think it is the right way to finance the needs of a nation.

I get tired of seeing people living in mansions that get tax deductions for their mortgage interest. There should be a cap on that IMO, if there is not.

That is what the AMT (Alternative Minimum Tax) is supposed to do. I don't know if it is effective or not (it wasn't for me in 2008), but that is the intent. I have had my deductions/credits limited in high income years, even w/o AMT, so I suspect it does work.

I hear about people going on business trips to exotic places and know that companies get to claim these as business expenses. People are given cruises, football tickets, etc by companies and again these are written off as business expenses. Restaurant food that is again written off as business expenses and for the most expensive places to eat. Places that the average person would never to be able to afford to eat without breaking the bank. These are some of the places that I would like to see tax changes.

I agree. Another thing that a National Sales Tax would fix. Tax based on the propensity to spend, period.

They can't. I have come to believe that this is a nation of corporations.

I agree that big Corporations have a lot of power, but they don't get a vote. They can hire lobbyists and finance campaigns. But so do Unions.

U.S. corporations get to close their factories, move to Mexico to make a product and then move to China. Our citizens get the huge risk of losing their jobs, with unemployment well into the double digits. Our citizens get dead end jobs, part time jobs, and loss of jobs to foreign competition. They get age discrimination. They get loss of benefits from their small employers.

True. You might view it differently if you were on the receiving end of the job in China, Mexico, etc. Then you might say 'whew, finally I am able to work a 12 hour day, and get enough money to feed my family, while those rich Americans complained about this job paying 5x what I get, got money back from the Feds, and felt abused when their cable went dead for an hour.'

They lose what they thought was equity in their homes.

Maybe they bought at a market peak with little/nothing down? That's what happens when you use leverage. It isn't just the big old nasty banks using leverage. The FDIC insures my savings account to a certain amount (through the funds it collects). I didn't know our home values came with a guarantee. Is there an HVIC (Home Value Insurance Corporation)? I need to apply for some relief if there is, how about an IRAIC, mine is hurting also. I thought that equity in my investment was never supposed to drop, really.

Conversely, lots of middle-class and lower middle-class people bought into the home market just before it took off. I don't recall any praise for the banks for helping these people leverage themselves into an extremely profitable situation. That was just business. But when it turns on 'em, well, let's find someone to blame.

And if there is a safety net some people call that voting benefits for themselves and thus somehow suspect.

And if corporations w/o a vote lobby in their own self-interest, that is called out as suspect. I guess that is different.

The one thing I agree with the "teaparty" on is that they have the right to be pissed off. Our citizens have been screwed.

Yep, I'd really have to say that anyone in my position in 2008, with $84,000 AGI was really getting screwed with a $24 FIT tax bill.

-ERD50

 

[harley]

They are not trying to scam the government.

As ERD said, those of us who pay little in FIT aren't trying to scam the government, we're just following the rules as written by said government.

I get tired of seeing people living in mansions that get tax deductions for their mortgage interest. There should be a cap on that IMO, if there is not.

There is actually a 1 million dollar cap on mortgage interest deductions. See, they're listening!

I hear about people going on business trips to exotic places and know that companies get to claim these as business expenses. People are given cruises, football tickets, etc by companies and again these are written off as business expenses. Restaurant food that is again written off as business expenses and for the most expensive places to eat. Places that the average person would never to be able to afford to eat without breaking the bank. These are some of the places that I would like to see tax changes.

I don't really disagree with you about some of these tax deductions, but...

I do not mind seeing the so-called "kiddie tax breaks".

I don't see how it would be fair to allow the tax deductions you (or whomever) approve of, while disallowing the ones you don't get to claim.

Dump them all, and charge a flat tax, or something. It still wouldn't be fair, but maybe fairer. And certainly simpler.

 

[Leonidas]

I don't see how it would be fair to allow the tax deductions you (or whomever) approve of, while disallowing the ones you don't get to claim.

Dump them all, and charge a flat tax, or something. It still wouldn't be fair, but maybe fairer. And certainly simpler.

My newest favorite Andrew Jackson quote:

The wisdom of man never yet contrived a system of taxation that would operate with perfect equality.

 

[ziggy29]

The one thing I agree with the "teaparty" on is that they have the right to be pissed off. Our citizens have been screwed.

To me it's less the *level* of taxation as where the taxes have been going in the last couple of years. There's an increasing feeling that those who don't take excessive risk, those who made more "responsible" choices, are being soaked (and let's face it, given the debt and deficit taxes *must* rise) in order to rescue those entities (individuals and corporations alike) which made reckless and irresponsible choices. There's a growing sentiment that we're turning into a nation which takes from the responsible to "make whole" the irresponsible. Historically that mostly only included people who were temporarily down on their luck, but now it seems we're paying the bill for the people who shot themselves in the foot.

I think it's the feeling that this is where the taxes are going that is fueling the anti-tax sentiment as much as the *level* of taxation itself. I know that's true for me -- I have less objection to the level of taxes I pay than where I've seen my taxes going for the last couple years. And I have less objection to the taxes than to the deficits. If we want it today, we should be paying for it today -- not partying today and giving the hangover to our grandkids.

 

[ERD50]

U.S. corporations get to close their factories, move to Mexico to make a product and then move to China.

I just had to add a comment to this one.

Yes, the U.S. Corporations 'get' to close their factories here. It is a free country, right? They also 'got' to open them here.

I'd really like to see a group of people who are so upset with U.S. Corporations outsourcing their operations do something about it. How about they get together and start up some businesses, pay top wages and benefits, and try to stay in business? What right does anyone have to tell a business where to hire its workers?

And then, after we effectively take these jobs away from people in poorer countries, we can all take up a collection and send them charity to improve their lot, rather than allow them to improve their lot through gainful employment. It's a flat earth these days, if we pull in one place it pushes somewhere else.

-ERD50

 

[ERD50]

My newest favorite Andrew Jackson quote:

The wisdom of man never yet contrived a system of taxation that would operate with perfect equality.

heh-heh-heh- I'm not looking for 'perfect' or anything even close. But we sure could take some giant steps closer.

-ERD50

 

[Focus]

Even though this New York Times article was published a few days ago, I didn't see it posted in this thread. It clears things up:

47 percent has become shorthand for the notion that the wealthy face a much higher tax burden than they once did while growing numbers of Americans are effectively on the dole. Neither one of those ideas is true. They rely on a cleverly selective reading of the facts. So does the 47 percent number.

 

[ziggy29]

Even though this New York Times article was published a few days ago, I didn't see it posted in this thread. It clears things up:

Yes, we've already been over the payroll taxes/state and local taxes/sales taxes thing and, while it's true, is mostly a side issue at least if you're making it clear you're only talking about federal income tax.

And in reality, we haven't even talked about a "tax" that a lot of the poor and lower middle class pay, the most regressive "tax" of all -- the lottery...

 

[jIMOh]

Even though this New York Times article was published a few days ago, I didn't see it posted in this thread. It clears things up:

Two telling quotes from article, IMO

Focusing on the statistical middle class — the middle 20 percent of households, as ranked by income — underlines this point. Households in this group made $35,400 to $52,100 in 2006, the last year for which the Congressional Budget Office has released data. That would describe a household with one full-time worker earning about $17 to $25 an hour. Such hourly pay is typical for firefighters, preschool teachers, computer support specialists, farmers, members of the clergy, mail carriers, secretaries and truck drivers, according to the Bureau of Labor Statistics.

Taking into account both taxes and tax credits, the average household in this group paid a total income tax rate of just 3 percent. A good number of people, in fact, paid no net income taxes. They are among the alleged free riders.

and

Why? People do not receive benefits equal to the payroll taxes they paid. Those who die at age 70 will receive much less in Social Security and Medicare than they paid in taxes. Those who die at 95 will probably get much more.

The different kinds of federal taxes are really just accounting categories. At the end of the day, the government has to cover the cost of all its operations with revenue from all its taxes. We can’t wish our deficit away by saying that it’s mostly a Medicare and Social Security deficit.

Overall, I was not impressed with article because it did not use many stats to back up its points.

 

[kcowan]

Just finished 2009 taxes - total $105k, taxes $15k. Canada with healthcare included.