Monday, April 18, 2016

45% of Americans Pay No Income Tax

When I was teaching American history, I mentioned that most colonies limited voting to men with property.  When I asked students why: one observed that only those with "skin in the game" would have a strong enough reason to be concerned about their decisions.  From 4/18/16 CBS MarketWatch:
Many Americans don’t have to worry about giving Uncle Sam part of their hard-earned cash for their income taxes this year.

An estimated 45.3% of American households — roughly 77.5 million — will pay no federal individual income tax, according to data for the 2015 tax year from the Tax Policy Center, a nonpartisan Washington-based research group. (Note that this does not necessarily mean they won’t owe their states income tax.)

Roughly half pay no federal income tax because they have no taxable income, and the other roughly half get enough tax breaks to erase their tax liability, explains Roberton Williams, a senior fellow at the Tax Policy Center.
These aren't just welfare recipients and homeless people, either.  Remember that if you have a net worth exceeding $5 million, income tax is optional.  That much money invested in municipal bonds of your state will produce about $200,000 in non-taxable income (exempt from both federal and state income taxes).  Most people can live on $200,000 net income per year. (And if you can't, I will be happy to assist you.)

Too many people have no "skin in the game" concerning government spending.  No wonder they like spending money wildly.

2 comments:

Rich Rostrom said...

However, almost every wage earner pays payroll taxes at an effective rate of 13.3%.

Clayton Cramer said...

Yes, but not for general government services but Social Security.