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Nearly half of US households escape fed income tax
Recession, new tax credits have nearly half of US households paying no federal income tax



Stephen Ohlemacher, Associated Press Writer, On Wednesday April 7, 2010, 1:34 pm EDT
WASHINGTON (AP) -- Tax Day is a dreaded deadline for millions, but for nearly half of U.S. households it's simply somebody else's problem.

About 47 percent will pay no federal income taxes at all for 2009. Either their incomes were too low, or they qualified for enough credits, deductions and exemptions to eliminate their liability. That's according to projections by the Tax Policy Center, a Washington research organization.

Most people still are required to file returns by the April 15 deadline. The penalty for skipping it is limited to the amount of taxes owed, but it's still almost always better to file: That's the only way to get a refund of all the income taxes withheld by employers.

In recent years, credits for low- and middle-income families have grown so much that a family of four making as much as $50,000 will owe no federal income tax for 2009, as long as there are two children younger than 17, according to a separate analysis by the consulting firm Deloitte Tax.

Tax cuts enacted in the past decade have been generous to wealthy taxpayers, too, making them a target for President Barack Obama and Democrats in Congress. Less noticed were tax cuts for low- and middle-income families, which were expanded when Obama signed the massive economic recovery package last year.

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.

The bottom 40 percent, on average, make a profit from the federal income tax, meaning they get more money in tax credits than they would otherwise owe in taxes. For those people, the government sends them a payment.

"We have 50 percent of people who are getting something for nothing," said Curtis Dubay, senior tax policy analyst at the Heritage Foundation.

The vast majority of people who escape federal income taxes still pay other taxes, including federal payroll taxes that fund Social Security and Medicare, and excise taxes on gasoline, aviation, alcohol and cigarettes. Many also pay state or local taxes on sales, income and property.

That helps explain the country's aversion to taxes, said Clint Stretch, a tax policy expert Deloitte Tax. He said many people simply look at the difference between their gross pay and their take-home pay and blame the government for the disparity.

"It's not uncommon for people to think that their Social Security taxes, their 401(k) contributions, their share of employer health premiums, all of that stuff in their mind gets lumped into income taxes," Stretch said.

The federal income tax is the government's largest source of revenue, raising more than $900 billion -- or a little less than half of all government receipts -- in the budget year that ended last Sept. 30. But with deductions and credits, especially for families with children, there have long been people who don't pay it, mainly lower-income families.

The number of households that don't pay federal income taxes increased substantially in 2008, when the poor economy reduced incomes and Congress cut taxes in an attempt to help recovery.

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.

In 2008, President George W. Bush signed a law providing most families with rebate checks of $300 to $1,200. Last year, Obama signed the economic recovery law that expanded some tax credits and created others. Most targeted low- and middle-income families.

Obama's Making Work Pay credit provides as much as $800 to couples and $400 to individuals. The expanded child tax credit provides $1,000 for each child under 17. The Earned Income Tax Credit provides up to $5,657 to low-income families with at least three children.

There are also tax credits for college expenses, buying a new home and upgrading an existing home with energy-efficient doors, windows, furnaces and other appliances. Many of the credits are refundable, meaning if the credits exceed the amount of income taxes owed, the taxpayer gets a payment from the government for the difference.

"All these things are ways the government says, if you do this, we'll reduce your tax bill by some amount," said Roberton Williams, a senior fellow at the Tax Policy Center.

The government could provide the same benefits through spending programs, with the same effect on the federal budget, Williams said. But it sounds better for politicians to say they cut taxes rather than they started a new spending program, he added.

Obama has pushed tax cuts for low- and middle-income families and tax increases for the wealthy, arguing that wealthier taxpayers fared well in the past decade, so it's time to pay up. The nation's wealthiest taxpayers did get big tax breaks under Bush, with the top marginal tax rate reduced from 39.6 percent to 35 percent, and the second-highest rate reduced from 36 percent to 33 percent.

But income tax rates were lowered at every income level. The changes made it relatively easy for families of four making $50,000 to eliminate their income tax liability.

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.

As a single guy, making almost 100K/year, I paid less than $500 in income tax last year after all was said and done between deductions and expemtions. It's not fair to the top tier earners to be carrying the load of everyone else, but at the same time the government has made it such a cat and mouse game that everyone is doing everything they can to pay nothing. It's a broken system that needs to go.

We ALL benefit from the freedoms in this country and we all use it's resources. We should all share the burden equally. Be it the Fair Tax Act or a flat rate income tax (which would eliminate billions of dollars wasted trying to navigate the tax code). For those earning less than XX dollars, you either pay nothing or get a refund at the end of the year. However there is absolutely no reason that someone making 250K+ should carry a higher percentage than those earning 50K. By definition a flat tax would tax them more anyway.

The system is out of control, along with gov't spending.

As a single guy, making almost 100K/year, I paid less than $500 in income tax last year after all was said and done between deductions and expemtions. It's not fair to the top tier earners to be carrying the load of everyone else, but at the same time the government has made it such a cat and mouse game that everyone is doing everything they can to pay nothing. It's a broken system that needs to go.

We ALL benefit from the freedoms in this country and we all use it's resources. We should all share the burden equally. Be it the Fair Tax Act or a flat rate income tax (which would eliminate billions of dollars wasted trying to navigate the tax code). For those earning less than XX dollars, you either pay nothing or get a refund at the end of the year. However there is absolutely no reason that someone making 250K+ should carry a higher percentage than those earning 50K. By definition a flat tax would tax them more anyway.

The system is out of control, along with gov't spending.

Or did you only pay $500 when you filed? I suspect that you paid considerably more than this over the course of the year as your withholdings disappeared down thier state sponsored ratholes, never to be seen again. At least not by you. It is a sad irony that the great Milton Friedman was the inventor of the withholding technique during (or right before) WW2.

If you did only pay $500, good for you and enjoy it while it lasts. It won't be long before they come back for you too.

WW

All income is taxed at 10%. Income tax is paid each quarter by the taxpayer, there are no payroll withholdings. There are no tax exemptions, deductions, credits, etc. The lowest quintile of wage earners may choose to claim an exemption from paying tax, at the expense of exercising their right to vote. Should they choose to remain as an eligible voter, they pay the same income tax as everyone else.

The corporate tax is abolished, but all net corporate earnings are taxed as income to shareholders, proportional to their ownership interest in the corporation.

There are no other sources of revenue for the federal government. The size of the federal government (budget expenditures) is fixed at 10% of last years GDP.

During times of war, as declared by the US congress, the congress may assess a sales tax to pay for the additional costs to the government. This tax must be voted on each year and will be void at the cessation of hostilities.

All of these must be encoded in a tightly worded amendm,ent to the constitution.

WW

A couple of points:
1. The progressive Federal tax system allows other taxes to be regressive and flat - some state income taxes, sales taxes, fica etc - this is not a coincidence.

2. "Hidden taxes" are regressive - Kraft pays federal taxes, and that is priced into every block of cheese.

3. You too can pay no Federal income tax! All you have to do is make no money! Who in a household that pays federal income tax would like to switch places with a household that pays no federal income tax?

It is right that everything worth doing is worth paying for - and it's better that everyone see exactly what they are paying so government is more accountable; it is wrong to assume that half the country is getting a "free ride" because they didn't pay any federal income tax.

A couple of points:
1. The progressive Federal tax system allows other taxes to be regressive and flat - some state income taxes, sales taxes, fica etc - this is not a coincidence.

2. "Hidden taxes" are regressive - Kraft pays federal taxes, and that is priced into every block of cheese.

3. You too can pay no Federal income tax! All you have to do is make no money! Who in a household that pays federal income tax would like to switch places with a household that pays no federal income tax?

It is right that everything worth doing is worth paying for - and it's better that everyone see exactly what they are paying so government is more accountable; it is wrong to assume that half the country is getting a "free ride" because they didn't pay any federal income tax.

Roughly 73% of all Federal income tax is collected from about 10 percent of the earners. I can well imagine the outcry if 10% of the population was targeted in a similar manner due to ethnic or geographic reasons. It is discrimanatory, it is wrong and it will one day be viewed as slavery is today.
Taking my money and time is taking my life, cute labels like regressive and progressive are like calling the holocaust the final solution.

We all need to pay taxes, ten percent for everyone would solve two major problems. Government is way too large and has become far too expensive for the average person. How many of us could write a check for around 1.5 million dollars that the gov has obligated every family of four to pay?
Second, they need to stop selling what they don't own, they have no right to spend well beyond what they collect.


A tax on just half of us is just wrong, and there is no possible logical defense. If we don't share the responsibility, how can we possibly share the benefit?
How would you feel about just allowing half of us to vote, the half paying Federal income tax?

Or did you only pay $500 when you filed? I suspect that you paid considerably more than this over the course of the year as your withholdings disappeared down thier state sponsored ratholes, never to be seen again. At least not by you. It is a sad irony that the great Milton Friedman was the inventor of the withholding technique during (or right before) WW2.

If you did only pay $500, good for you and enjoy it while it lasts. It won't be long before they come back for you too.

WW

You would be correct, I actually have the gubment an interest free loan.

it is wrong to assume that half the country is getting a "free ride" because they didn't pay any federal income tax.

Please explain... not paying into the system and enjoying the benefits is a free ride if you ask me.

Roughly 73% of all Federal income tax is collected from about 10 percent of the earners. I can well imagine the outcry if 10% of the population was targeted in a similar manner due to ethnic or geographic reasons. It is discrimanatory, it is wrong and it will one day be viewed as slavery is today.
Taking my money and time is taking my life, cute labels like regressive and progressive are like calling the holocaust the final solution.

We all need to pay taxes, ten percent for everyone would solve two major problems. Government is way too large and has become far too expensive for the average person. How many of us could write a check for around 1.5 million dollars that the gov has obligated every family of four to pay?
Second, they need to stop selling what they don't own, they have no right to spend well beyond what they collect.


A tax on just half of us is just wrong, and there is no possible logical defense. If we don't share the responsibility, how can we possibly share the benefit?

While you may be more on the hook for wars (your time lost), you are getting a pretty good deal for the highway you drove to work on (your time saved). Slavery? I doubt it - it's exactly that kind of ranting that will keep Libertarianism a fringe idea. If you want to actually make a difference start reading someone like Tyler Cowen who doesn't turn off everyone except his circle of whiner friends.

While you may be more on the hook for wars (your time lost), you are getting a pretty good deal for the highway you drove to work on (your time saved). Slavery? I doubt it - it's exactly that kind of ranting that will keep Libertarianism a fringe idea. If you want to actually make a difference start reading someone like Tyler Cowen who doesn't turn off everyone except his circle of whiner friends.

What if only half of us got to use those roads, the half that paid for them?

The situation is going to resolve itself eventually, we are on an unsustainable path and all the Kings men and all the Kings horses won't be able to mend it.

Ranting, fringe, Libertarian? This means you can't construct a logical argument and you won't step up to the plate and pay your fair share, but you are perfectly willing to let others do it for you. I would be ashamed to act that way, but I tend to take responsibility for my actions.
I find this very revealing.
It is never too late to start thinking for yourself instead of being spoon fed. Spoon feeding has gotten us to this point, are you proud of that?

The situation is going to resolve itself eventually, we are on an unsustainable path and all the Kings men and all the Kings horses won't be able to mend it.
I agree, question is will sanity prevail and will we as a nation do it ourselves before an implosion? Hope so, but if not keep those EBR's handy.

Please explain... not paying into the system and enjoying the benefits is a free ride if you ask me.

It's not a free ride for the reasons I laid out - they do pay federal income taxes, just not directly. Do you think that FICA taxes and sales taxes could be regressive without a progressive federal tax? Wouldn't a Big Mac be cheaper if McDonald's didn't have to pay corporate tax? Now, one could argue that it would be better - the federal government would be more accountable - if the working poor realized how much they were indeed paying, but to say that they are paying nothing is ridiculous. There was a study that showed all Americans pay roughly the same amount of overall tax when the dust finally settles - I'll try to find it again and post it.

It's not a free ride for the reasons I laid out - they do pay federal income taxes, just not directly. Do you think that FICA taxes and sales taxes could be regressive without a progressive federal tax? Wouldn't a Big Mac be cheaper if McDonald's didn't have to pay corporate tax? Now, one could argue that it would be better - the federal government would be more accountable - if the working poor realized how much they were indeed paying, but to say that they are paying nothing is ridiculous. There was a study that showed all Americans pay roughly the same amount of overall tax when the dust finally settles - I'll try to find it again and post it.

Nobody is saying they are paying nothing, the fact is that redistribution is called that for a reason. Why can't we all pay the same rate? Why are half of us taxed at one level and not the other.
The truth is that there is a near 50/50 split at the political level and the tax system is the primary cause. If I didn't have to pay Federal taxes, why would I care what they were or if they increased to unbearable levels?
You know the answer.

looks like there is a 4th topic that should never be argued....religion, sports, politics, and now taxes.....but what the hey

a flat tax may fix most of the fiscal monetary issues for the govt, but IMO its still unfair. the family of 4 making 30k a year probably lives in a home that is 90-100k (using the 3x yearly income rule). So that would allow the dude making 1M a year to live in a 3M house. The dude making 30k pays 3k, so that reduces his mortgage to 80-90k give or take, and millionaire is forced to live in a $2.7M house. Not to mention the yearly requirement to LIVE ie food, healthcare, education etc, its harder for the 30k guy to make ends meet. The millionaire will never go without healthcare, education, milk, booze :P etc. So with a flat income tax, should we make the millionaire pay a proportionately higher amount of money for food? Even if he eats at the most expensive eatery in NYC everyday, he is still doing better than the lower income family.

Funny thing is, I am the furthest person I know from calling my self a bleeding heart liberal, I firmly believe in survival of the fittest when it comes to capitalism. But as an ECON major (who remembers little from college) I have never seen a reason for not having a progressive income tax, while at the same time, flat taxes exists, and even regressive ones. Its the balance between all of them that would make things FAIR. But in our current system which NEEDS to be changed, that rich man still finds ways (thru spending money) to keep from paying his FAIR share

There was a study that showed all Americans pay roughly the same amount of overall tax when the dust finally settles - I'll try to find it again and post it.

I'm very interested to see this study. Do you remember what the context was?

What if only half of us got to use those roads, the half that paid for them?

This means you can't construct a logical argument and you won't step up to the plate and pay your fair share Let me spell the logic out for you then - a road is something that is built with a regressive tax - like a state sales tax or a gasoline tax - where the people who pay the highest as a percentage of their income for the tax are the working poor.

Let me spell the logic out for you then - a road is something that is built with a regressive tax - like a state sales tax or a gasoline tax - where the people who pay the highest as a percentage of their income for the tax are the working poor.

I find that interesting. If I make a million dollars and you make 10,000 and we are both taxed at 10%, who pays more?

The sad part is that not only are the higher earners paying more for the exact same benefits, but they contribute far more to the economy and the government.

looks like there is a 4th topic that should never be argued....religion, sports, politics, and now taxes.....

There are arguments and there are displays of facts. Not any room for facts in some of those topics. Some can't tolerate the facts in the others.:D

Nobody is saying they are paying nothing, the fact is that redistribution is called that for a reason. Why can't we all pay the same rate? Why are half of us taxed at one level and not the other.
The truth is that there is a near 50/50 split at the political level and the tax system is the primary cause. If I didn't have to pay Federal taxes, why would I care what they were or if they increased to unbearable levels?
You know the answer.

Are you really trying to say the 50/50 split is due to those that pay tax and those that don't? Cause if so, you are seriously underestimating the amount of New England suburbanite liberals in the top 50, and definitely leaving out some white Southern Baptist conservatives that live in single wides and are firmly in the bottom 50. Check again, sir - the highest incomes are in the blue states, and redistribution is mostly from the blue states to the red states.

looks like there is a 4th topic that should never be argued....religion, sports, politics, and now taxes.....but what the hey

a flat tax may fix most of the fiscal monetary issues for the govt, but IMO its still unfair. the family of 4 making 30k a year probably lives in a home that is 90-100k (using the 3x yearly income rule). So that would allow the dude making 1M a year to live in a 3M house. The dude making 30k pays 3k, so that reduces his mortgage to 80-90k give or take, and millionaire is forced to live in a $2.7M house. Not to mention the yearly requirement to LIVE ie food, healthcare, education etc, its harder for the 30k guy to make ends meet. The millionaire will never go without healthcare, education, milk, booze :P etc. So with a flat income tax, should we make the millionaire pay a proportionately higher amount of money for food? Even if he eats at the most expensive eatery in NYC everyday, he is still doing better than the lower income family.

Funny thing is, I am the furthest person I know from calling my self a bleeding heart liberal, I firmly believe in survival of the fittest when it comes to capitalism. But as an ECON major (who remembers little from college) I have never seen a reason for not having a progressive income tax, while at the same time, flat taxes exists, and even regressive ones. Its the balance between all of them that would make things FAIR. But in our current system which NEEDS to be changed, that rich man still finds ways (thru spending money) to keep from paying his FAIR share

Bottom line is that you think some should be excused from the obligations they have in fact created. Either we all support it together or we all pick another system.
Climb up on that wall and carry a rifle or stay home and cry about the cost.
We are all in this together.
Fair would actually mean dividing the tax bill equally among all of us, and I dare say most of us, the vast majority, could not pay it under any reasonable measure.

We ALL benefit from the freedoms in this country and we all use it's resources. We should all share the burden equally. Be it the Fair Tax Act or a flat rate income tax (which would eliminate billions of dollars wasted trying to navigate the tax code). For those earning less than XX dollars, you either pay nothing or get a refund at the end of the year. However there is absolutely no reason that someone making 250K+ should carry a higher percentage than those earning 50K. By definition a flat tax would tax them more anyway.

The system is out of control, along with gov't spending.

I agree with the most of the aspects of the Fair Tax, however my fear is that the government would mutate it into a VAT and keep the income tax (aka class warfare). What politician wouldn't want a new source of revenue and a chance to auction off tax breaks?

Some people seem to have the notion that taxes somehow equal benefits (whether it's roads, schools, etc). Few realize, and to paraphrase de Toqueville, that politicians are simply buying votes by spending other people's money. It is for that reason, I don't believe that a true Fair Tax type system would be put in place, no matter the logic. As a matter of fact, its problem is that it makes too much sense. There is reason for the twisted, corrupt, and seemingly illogical class warfare tax system in place.

Are you really trying to say the 50/50 split is due to those that pay tax and those that don't? Cause if so, you are seriously underestimating the amount of New England suburbanite liberals in the top 50, and definitely leaving out some white Southern Baptist conservatives that live in single wides and are firmly in the bottom 50. Check again, sir - the highest incomes are in the blue states, and redistribution is mostly from the blue states to the red states.

You can't quite seem to seperate the political argument from the economic argument. It is a common malady.:D

I find that interesting. If I make a million dollars and you make 10,000 and we are both taxed at 10%, who pays more?

The sad part is that not only are the higher earners paying more for the exact same benefits, but they contribute far more to the economy and the government.

Wrong again. Let's assume a road, and a gasoline tax to build the road and everyone in town drives the same - in this case it's a regressive tax because the richest pay the same in dollar amount, but the least as a percentage of their income. You might think everyone benefits the same from this road, but you'd be wrong again. The rich benefit more because they are more likely to have workers that travel on this road and they are the ones shipping their products on this road. This is a road whose cost is largely borne by working poor simply because there are so many more of them than there are rich people.

You can't quite seem to seperate the political argument from the economic argument. It is a common malady.:D

And you can't seem to tell the difference between overall tax burden and one federal tax - also common.

Wrong again. Let's assume a road, and a gasoline tax to build the road and everyone in town drives the same - in this case it's a regressive tax because the richest pay the same in dollar amount, but the least as a percentage of their income. You might think everyone benefits the same from this road, but you'd be wrong again. The rich benefit more because they are more likely to have workers that travel on this road and they are the ones shipping their products on this road. This is a road whose cost is largely borne by working poor simply because there are so many more of them than there are rich people.

Wow. The road is equally available to all, the benefit is the same, if you happen to run more vehicles across it you will pay more, in addition to your higher amount in flat rate taxes.
You have mistaken a higher contribution to both society and government as a derivitive of some element of government largesse, a common and sad error in logic.
Bill Gates didn't get rich because the roads were there or the government taxed him less. It is quite laughable to even think this way.:D

And you can't seem to tell the difference between overall tax burden and one federal tax - also common.

Still waiting for that study you claim exists showing we all pay about the same. Percentage wise, no. Actual tax paid, no.:D

Wow. The road is equally available to all, the benefit is the same, if you happen to run more vehicles across it you will pay more, in addition to your higher amount in flat rate taxes.
You have mistaken a higher contribution to both society and government as a derivitive of some element of government largesse, a common and sad error in logic.
Bill Gates didn't get rich because the roads were there or the government taxed him less. It is quite laughable to even think this way.:D

and wrong again. It gets even better. The rich person doesn't actually pay the cost of the gasoline tax for his shipping, he passes most of that on to the buyer of his product, creating another hidden regressive tax paid largely by the working poor.

There was a study that showed all Americans pay roughly the same amount of overall tax when the dust finally settles - I'll try to find it again and post it.

If true, this information should be made known to the vast majority of citizens who have no idea how fiercely they are being milked. It would precipitate the mother of all tax revolts. :eek:

This is the one that shows that most of the red states - the ones so concerned that the rich are paying too much tax, are actually the biggest recipients of Federal tax dollars: The Tax Foundation - Federal Spending Received Per Dollar of Taxes Paid by State, 2005 (http://www.taxfoundation.org/research/show/266.html)

and wrong again. It gets even better. The rich person doesn't actually pay the cost of the gasoline cost for his shipping, he passes most of that on to the buyer of his product, creating another hidden regressive tax paid largely by the working poor.

I agree that all corporate taxes are paid by the consumer of that corporations products, to say otherwise is folly.
That is why a flat tax for all and zero corporate tax would be in all of our best interest. Don't you agree?

This is the one that shows that most of the red states - the ones so concerned that the rich are paying too much tax, are actually the biggest recipients of Federal tax dollars: The Tax Foundation - Federal Spending Received Per Dollar of Taxes Paid by State, 2005 (http://www.taxfoundation.org/research/show/266.html)

The ugly face of redistribution. What has it bought us? You have been bought and sold like a commodity and don't even know it, I feel sorry for you.
I really do.

I agree that all corporate taxes are paid by the consumer of that corporations products, to say otherwise is folly.
That is why a flat tax for all and zero corporate tax would be in all of our best interest. Don't you agree?

So you DO admit the poor pay some federal tax! I would heartily agree to elimination of corporate taxes in favor of a V.A.T. - but only because the corporate tax rate actually matters for economic growth. On the other hand, if you look at the history of this country, you will find that a high marginal personal income tax rate doesn't make any difference in terms of growth.

The ugly face of redistribution. What has it bought us? You have been bought and sold like a commodity and don't even know it, I feel sorry for you.
I really do.

Funny. Earlier you had me pegged as one of the 47% that didn't pay Federal taxes, being towed along by you, the walking contradiction - the Libertarian who owes his high wages and cush hours to labor unions that wouldn't have a prayer in his Utopia. Now you're saying that I'm naively paying tax and not being angry enough about it?

So you DO admit the poor pay some federal tax! I would heartily agree to elimination of corporate taxes in favor of a V.A.T. - but only because the corporate tax rate actually matters for economic growth. On the other hand, if you look at the history of this country, you will find that a high marginal personal income tax rate doesn't make any difference in terms of growth.


Sorry you got that wrong. Low tax rates are directly linked to growth. You might want to read a few books on economics before you embarrass yourself any further.
High tax rates on both individuals and corporations cause a long term brain drain and money drain. Money goes where it is most welcome, water flows downhill. You can't change these facts by hoping.:D

Funny. Earlier you had me pegged as one of the 47% that didn't pay Federal taxes, being towed along by you, the walking contradiction - the Libertarian who owes his high wages and cush hours to labor unions that wouldn't have a prayer in his Utopia. Now you're saying that I'm naively paying tax and not being angry enough about it?

You are the one pasting labels, not me. I am just asking you to examine the situation. The more labels you paste, the more obvious it becomes that you have no idea of the underlying principles.:D

Sorry you got that wrong. Low tax rates are directly linked to growth. You might want to read a few books on economics before you embarrass yourself any further.
High tax rates on both individuals and corporations cause a long term brain drain and money drain. Money goes where it is most welcome, water flows downhill. You can't change these facts by hoping.:D

I didn't get that wrong, you changed my statement. I said high MARGINAL income tax rates don't matter, not overall tax rates. Check that economics text book of yours for the difference.

I didn't get that wrong, you changed my statement. I said high MARGINAL income tax rates don't matter, not overall tax rates. Check that economics text book of yours for the difference.

Split hairs if you must, but the past few decades have proved you wrong. Dead wrong.
There are well known and clear ways to deal with our problems, but most lack the courage to employ them or even mention them.

As I said before, the problem is getting ready to take care of itself, much of this is going to collapse under its own dead weight. False reasoning doesn't ever last long in the light of day. Watch and enjoy.

Just for fun and irony, I thought of some of the "useful" people in the top 53% who pay federal income taxes, and some of the "free riders" in the bottom 47%

The brave overtaxed drivers of our economy
- editorialists at the washington post and ny times
- most government workers
- lobbyists

And the roots of a lot of evil:
- most regional airline F.O.s
- flight instructors
- enlisted personnel in the armed forces
- medical students working part time to pay their way through school

Just for fun and irony, I thought of some of the "useful" people in the top 53% who pay federal income taxes, and some of the "free riders" in the bottom 47%

The brave overtaxed drivers of our economy
- editorialists at the washington post and ny times
- most government workers
- lobbyists

And the roots of a lot of evil:
- most regional airline F.O.s
- flight instructors
- enlisted personnel in the armed forces
- medical students working part time to pay their way through school

Ever get hired by a poor person? I know you never will. You like the feel of class struggle, but it really isn't going to help you. Wear the Che t-shirt and parrot the lines, but you know who pays the bills. Funny you try to deny it.

Split hairs if you must, but the past few decades have proved you wrong. Dead wrong.
There are well known and clear ways to deal with our problems, but most lack the courage to employ them or even mention them.

As I said before, the problem is getting ready to take care of itself, much of this is going to collapse under its own dead weight. False reasoning doesn't ever last long in the light of day. Watch and enjoy.

I'm trying to figure out how 3 decades of historically low marginal tax rates leading to the country collapsing under its own weight is proving me wrong.

Ever get hired by a poor person? I know you never will. You like the feel of class struggle, but it really isn't going to help you. Wear the Che t-shirt and parrot the lines, but you know who pays the bills. Funny you try to deny it.

Boy I'm glad you said you weren't labeling or I'd think you were calling me a Socialist.

I'm trying to figure out how 3 decades of historically low marginal tax rates leading to the country collapsing under its own weight is proving me wrong.

You have failed to understand two things. Effective rates and who has actually paid the bills. Fantasy is fine, but all of this is not powered by unicorns and rainbows.

I'm trying to figure out how 3 decades of historically low marginal tax rates leading to the country collapsing under its own weight is proving me wrong.

Wow,

3 pages in one night on the money talk forum--that's got to be a record.

I don't want to intervene in a very good back-and-forth, but I wanted to throw something in as an aside:

In the 1980s legislation did make marginal tax rates lower. The problem has come from the inbility of the government to spend within its means. Lowering the marginal income tax rate can increase revenues or decrease them, depending where you are on the Laffer curve. But that doesn't matter if the government spends more money than you have.

I agree that we are collapsing, but I'd say that it is government spending that is the problem.

WW

Wow,

3 pages in one night on the money talk forum--that's got to be a record.

I don't want to intervene in a very good back-and-forth, but I wanted to throw something in as an aside:

In the 1980s legislation did make marginal tax rates lower. The problem has come from the inbility of the government to spend within its means. Lowering the marginal income tax rate can increase revenues or decrease them, depending where you are on the Laffer curve. But that doesn't matter if the government spends more money than you have.

I agree that we are collapsing, but I'd say that it is government spending that is the problem.

WW

Of course you are correct, and they can raise taxes 100% and they will still be far, far behind:


"To understand the predicament, numbers are necessary. The federal debt, approximately $12.5 trillion, represents funded debt. The unfunded promises associated with Social Security, Medicare, and Medicaid represent an additional liability of $106 trillion, according to trustee estimates.

A $106 trillion cash infusion is required today to make these programs solvent. But the entire net worth of the entire country is only about $55 trillion. If the U.S. government confiscated every single asset in this country, these programs would still be insolvent. And so would every citizen and corporation in the country. Quite simply, these programs promise twice what the country is worth!

In my post “Spiraling to Bankruptcy,” various methodologies were used to illustrate federal insolvency. Because large numbers are incomprehensible, they were translated into everyday examples. One example used the analogy of a family:

The federal government collects about $2.5 trillion in total revenues a year. That is from all sources of taxes and fees. Think of that as an individual’s annual gross salary. The debt owed by the government can be looked at as a great big mortgage. Thus, we have a family that has a mortgage 44.8 times greater than gross salary. That would be the equivalent of a man earning $50,000 gross salary having a mortgage of $2,240,000! An interest-only mortgage at 6% would require the family to pay annual interest of $134,000 per year. A conventional mortgage would be much higher. The example becomes even more ludicrous when one recognizes that taxes, food, clothing, savings, etc. all have to be subtracted from gross pay to determine what is left for debt service.

When we shift back to the federal government, the family analogy becomes even more absurd. The federal government has nothing left from their “gross pay.” Their “living expenses” actually exceeded their gross pay by $1.2 trillion last fiscal year. That is, they spent almost 50% more than they made. Comparable behavior is budgeted for the next ten years."

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I thought our gentle readers might enjoy this little nugget of wisdom during the season:

The complexity of the U.S. income tax laws
Even venerable legal scholars like Judge Learned Hand have expressed amazement and frustration with the complexity of the U.S. income tax laws. In the article, Thomas Walter Swan, 57 Yale Law Journal No. 2, 167, 169 (December 1947), Judge Hand wrote:

In my own case the words of such an act as the Income Tax… merely dance before my eyes in a meaningless procession: cross-reference to cross-reference, exception upon exception — couched in abstract terms that offer [me] no handle to seize hold of [and that] leave in my mind only a confused sense of some vitally important, but successfully concealed, purport, which it is my duty to extract, but which is within my power, if at all, only after the most inordinate expenditure of time. I know that these monsters are the result of fabulous industry and ingenuity, plugging up this hole and casting out that net, against all possible evasion; yet at times I cannot help recalling a saying of William James about certain passages of Hegel: that they were no doubt written with a passion of rationality; but that one cannot help wondering whether to the reader they have any significance save that the words are strung together with syntactical correctness.

Complexity is a separate issue from flatness of rate structures. In the United States, income tax codes are often legislatures' favored policy instrument for encouraging numerous undertakings deemed socially useful — including the buying of life insurance, the funding of employee health care and pensions, the raising of children, home ownership, development of alternative energy sources and increased investment in conventional energy. Special tax rebates granted for any purpose increase complexity, irrespective of the system's flatness or lack thereof.
wiki

I'm trying to figure out how 3 decades of historically low marginal tax rates leading to the country collapsing under its own weight is proving me wrong.

If you had actually studied the subject you might be familiar with this:

Hauser's Law is a theory that states that in the United States, federal tax revenues will always be equal to approximately 19.5% of GDP, regardless of what the top marginal tax rate is. The theory was first suggested in 1993 by Kurt Hauser, a San Francisco investment economist, who wrote at the time, "No matter what the tax rates have been, in postwar America tax revenues have remained at about 19.5% of GDP." In a May 20, 2008 editorial in the Wall St. Journal, David Ranson published a graph showing that even though the top marginal tax rate of federal income tax had varied between a low of 28% to a high of 91% between 1950 and 2007, federal tax revenues had indeed constantly remained at about 19.5% of GDP.[24] Critics of Hauser's Law, such as Zubin Jelveh in a Wall St. Journal editorial, point out that tax revenues have fallen as top income rates declined if you don't include Social Security revenues.[25] Similarly, other changes in tax rates and the income threshold for paying those rates are expected to impact tax revenues and should be considered when analyzing the relationship between tax-rates and tax revenues. wiki
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Rates have had little effect on revenue for many reasons. You may also want to look at the Laffer curve.

You might want to read a few books on economics before you embarrass yourself any further.

As a firm believer in Keynesian economics, I would highly recommend you begin with Charles Maynard Keynes.

Low tax rates are directly linked to growth.

Taxes are just one tool and unfortunately one that is controlled by politicians and not the Federal Reserve Board. Federal Reserve policy plays the only true role in the success or failure of our economies. The Federal Reserve must maintain the independent power to manipulate money supply and interest rates because prices and wages are not perfectly flexible. Unfortunately the Federal Reserve got it wrong and are only now acting Keynesian by financing all this spending via our budget deficit. Time will tell if the Fed remains on the correct path or it acts as it has in the past and merely does what is politically popular.

As a firm believer in Keynesian economics, I would highly recommend you begin with Charles Maynard Keynes.



Taxes are just one tool and unfortunately one that is controlled by politicians and not the Federal Reserve Board. Federal Reserve policy plays the only true role in the success or failure of our economies. The Federal Reserve must maintain the independent power to manipulate money supply and interest rates because prices and wages are not perfectly flexible. Unfortunately the Federal Reserve got it wrong and are only now acting Keynesian by financing all this spending via our budget deficit. Time will tell if the Fed remains on the correct path or it acts as it has in the past and merely does what is politically popular.

Perhaps far off track and worthy of another thread.
Keynes was an interesting figure among many economists. He is perhaps best remembered as an "apologist for statists".

He was popular with many politicos, for his mistaken beliefs that government could synthesize an economy with debt and a printing press gave them the freedom to venture in to the realm of the popular and unaffordable.

The last 17+ years in Japan is a perfect example of such thinking as was the prolonging of the Great Depression under FDR.

The most vibrant economies, if you look around, are the ones with the lowest level of state intervention.

A little more about Keynes and the validity of various theories in the tough world of reality.
Austin news, sports, weather, Longhorns, business | Statesman.com (http://www.statesman.com/search/content/life/stories/books/2009/10/04/1004skidelsky.html)

You seem to admire Keynes, but personally I find his theories a bit dusty and moldy. Time moves on and anyone who holds up a bit of theory or technology and states: "this is the ultimate and always will be..." is surely destined for failure.

I tend to favor Friedman and a few others who seem to have gotten it right, in contrast to the multiple very public, costly and mostly ignored failures of Keynes.
Anyone or any state or entity that seeks to limit your individual or economic freedom is a vivid warning of bad things to come.

http://en.wikipedia.org/wiki/Milton_Friedman

Sadly, the political acceptance or rejection of economic theory is frequently just an expedient to move forward with the politicos' own very distorted world view. We have all suffered and will suffer when our freedom to choose is withdrawn.

I don't wish to tell anyone what to do, and only ask the same of them.

Perhaps far off track

Especially far off track when you omit the quote.

and worthy of another thread.

I'll leave that to someone else. The threads I start get locked down.


Keynes was an interesting figure among many economists. He is perhaps best remembered as an "apologist for statists".

Don't forget the father of macroeconomics. He is far more revered among economists than you may wish to accept. I would assume you are more in the Milton Friedman camp.


He was popular with many politicos, for his mistaken beliefs that government could synthesize an economy with debt and a printing press gave them the freedom to venture in to the realm of the popular and unaffordable.

Exactly my point, but it is not the fault of Keynes that we continue to ignore the elephant in the room and abandon his theories. Today it is easy to be Keynesian, will it be tomorrow?


The last 17+ years in Japan is a perfect example of such thinking as was the prolonging of the Great Depression under FDR.

As one in the free market camp. I am confused that you would blame Keynes for prolonging the Great Depression rather where the real blame lies with the formation of the National Labor Relations Act and the Agricultural Adjustment Administration. There is little room for elasticity when produced goods come with fixed prices and agreed upon labor wages.



The most vibrant economies, if you look around, are the ones with the lowest level of state intervention.

We are now recovering from a vibrant housing economy that was caused by some of the lowest levels of state intervention. Bubbles will cease to exist when they either pop or are eased by intervention. The later is less painful.

Best Regards,
Gummerha8ter
I honestly guesed Friedman and posted before I read your edited addition. No joke!
I only mention this because of my lack of credibility.

[FONT=Arial][SIZE=2]I'll leave that to someone else. The threads I start get locked down.
I only mention this because of my lack of credibility.

Parsing is fun, but it often leads to a lack of context. Now that we know what you really want to talk about, why not PM me with a few facts about how your unload and reload program is proceeding?:D

Yeah, they were probably uncalled for. Especially considering the much more intriguing thought of economies.

A thought came to mind about your description of his ideas being "dusty and moldy". I believe if he were alive today considering his sexual orientation and how our liberal media love to promote the alternate lifestyle. I believe Keynes would have rock star status and his ideals would be anything but "dusty and moldy".

Can Greece get it's house in order with more debt? I don't think so.
Will they default? I think so.
Will Spain follow? I think so.
Will there be another market correction? I'm counting on it.
Will the bubble in China pop? Yes
Will all of this happen at the same time and be worse than the housing bubble?????

I do believe because of the past the fed will raise rates too soon and choke the life out of the current jobless recovery.

Anything positive in the near future?

With regard to the Unload and Re-Weigh Program. No issues with CG on either side of the bulkhead since Saturday. Hopefully our luck will continue!:cool:

Yeah, they were probably uncalled for. Especially considering the much more intriguing thought of economies.




Will they default? I think so.
Will Spain follow? I think so.
Will there be another market correction? I'm counting on it.
Will the bubble in China pop? Yes
Will all of this happen at the same time and be worse than the housing bubble?????

I do believe because of the past the fed will raise rates too soon and choke the life out of the current jobless recovery.

Anything positive in the near future?

With regard to the Unload and Re-Weigh Program. No issues with CG on either side of the bulkhead since Saturday. Hopefully our luck will continue!:cool:

I think it will become increasingly clear that the Falcon is no longer responding to the call of the Falconer. Control is less and less centralized in so many areas. Careful central planning will fail, just as it has so many times before.

Not exactly the specifics I was looking for.

Not exactly the specifics I was looking for.

Oh, you want detailed predictions by experts?:D----------------------------------------------------------------------------------------------------

The Propaganda Machine in 2007-2008 meltdown
BusinessWeek, Kiplinger's and USA Today reported on the false predictions made before the 2008 subprime credit meltdown spread rapidly across America and the world:

•Bernanke: "I don't anticipate any serious [failures] among large internationally active banks."

•Ken Fisher: "This year will end in the plus column ... so keep buying."

•"Mad Money" Jim Cramer: "Bye-bye bear market, say hello to the bull."

•Goldman Sachs' Abby Joseph Cohen: "The fear priced into stocks is likely to abate as recession fears fade."

•Barney Frank: "Freddie Mac and Fannie Mae are fundamentally sound."

•Barron's: "Home prices about to bottom."

•Worth magazine: "Emerging markets are the global investors' safe haven."

•Kiplinger's: "Stock investors should beat the rush to the banks."

•Irving Fisher, Yale Ph.D. in economics: "Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months." (Oct. 17, 1929)

•Goodbody market-letter in New York Times: "We feel that fundamentally Wall Street is sound, and that for people who can afford to pay for them outright, good stocks are cheap at these prices." (Oct. 25, 1929)

•Business Week: "The Wall Street crash doesn't mean that there will be any general or serious business depression ... For six years American business has been diverting a substantial part of its attention, its energies and its resources on the speculative game... Now that irrelevant, alien and hazardous adventure is over. Business has come home again, back to its job, providentially unscathed, sound in wind and limb, financially stronger than ever before." (Nov. 2, 1929)

•Harvard Economic Society: "A serious depression seems improbable; [we expect] recovery of business next spring, with further improvement in the fall." (Nov. 10, 1929)

•Treasury Secretary Andrew W. Mellon: "I see nothing in the present situation that is either menacing or warrants pessimism ... I have every confidence that there will be a revival of activity in the spring, and that during this coming year the country will make steady progress." (Dec. 31, 1929)

•President Herbert Hoover: "The depression is over." (June 1930)