Sign up for email updates

National Debt

Nearly Half of Americans Don’t PayIncome Taxes

  • March 02, 2012

    Our Federal Government is $15.3trillion in debt and racking up deficits in excess of $1 trillion a year. Youwould think that every American pays their fair share towards the FederalBudget right? Wrong. According to two studies, nearly half of Americans aren’tpaying taxes. In a study by the Tax Policy Center, they estimate that 46percent of American households either will pay no federal income tax in 2011 orwill receive more from the IRS than they pay in. Contrast that with 1984, when 85 percent of Americans paidfederal income tax.


    The Tax Policy Center further found that low incomes account for forfully half of the people who pay no Federal income tax and why so many Americans don’t contribute towardsour Federal Budget. For example, they found that a couple with twochildren earning less than $26,400 will pay no Federal income tax this yearbecause their $11,600 standard deduction and four exemptions of $3,700 eachreduce their taxable income to zero.

    Another study conducted by the Heritage Foundation shows that 21.8 percent of Americansreceive financial assistance from the Federal Government. Meaning a record high 67.3 million people are 'dependenton the federal government.' This figure does not include government employees.


    With so many Americans not contributingto the Federal Budget, there is a disconnect between the citizenry as for whatthe Government’s role is in our lives. Those who pay nothing, and receive muchsee no reason to get the record high $15.3 trillion in debt under control. Nomatter that each of the roughly300 million American citizens owes just over $17,000 per person towards thedebt — or about $70,000 for a family of four. Meanwhile, the remainder of thecountry is responsible for the perpetuation of this system, and feel saddled bythe Government’s fiscal mismanagement.


    It’s time for a simplification of our tax code which is fair to allAmericans. CapitolWatch supportsthe Fair Tax as well as the Flat Tax. Both of which would restore equality toour tax system.


    The Fair Tax would replace all Federal taxes on personal and corporateincome with a single broad national consumption tax on retail sales. This wouldapply a tax once at the point of purchase on all new goods and services forpersonal consumption. The proposal also calls for a monthly payment to allfamily households of lawful U.S. residents as an advance rebate, or “pre-bate”,of tax on purchases up to the poverty level. First introduced into Congress in 1999,a number of congressional committees have heard testimony on the bill; however,it has not moved from committee and has yet to have any effect on the taxsystem.


    Similarly, the implementation of a Flat Tax, or single level of incometaxation for all Americans, would introduce some much needed equality to our taxcode. A single marginal rate, instead of a progressive tax rate, ensures thatall Americans have some skin in the game when it comes to paying into the Federalbudget. So far seven states —Colorado, Illinois, Indiana, Massachusetts, Michigan, Pennsylvania, and Utah — haveseen the benefits of this system and tax household incomes at a single rate.These range from 3.07% in Pennsylvania to 5.3% in Massachusetts. Pennsylvaniaeven has a pure flat tax with no zero-bracket amount.


    While both of these proposals share the similarity of a single rate oftaxation, they also share the larger goal of tax simplification. The Fair Taxand the Flat Tax eliminate the need for completing the burdensome and arcaneFederal Income Tax forms. Each year Americans spend billions of dollars simplyjust to complete their taxes. With each of these systems, your taxes would befilled out on a simple post card. With nearly half of this country taking noownership of our busted budget and our country relying on an out-of-date taxcode, it’s time for some rethinking of how we pay this nation’s bills.

Related CW Articles

See all related stories »