Saturday, April 17, 2010

Fox And Tea Party's Phony Tax Complaint

 I have news for Sean Hannity, Sarah Palin and the Tea Party people who bemoan the fact that 47% of Americans don't pay federal income taxes.

They don't because Republicans in Congress created tax deductions and tax credits in which a family of four earning $50,000 a year have a net zero liability. If a Gallup poll is correct, that means half the people identifying with the Tea Party movement who complain about high taxes don't pay any either.

These critics also complain that government entitlement programs are driving the country into bankruptcy. Yet, about 75% of American households pay more in payroll taxes to support Social Security and Medicare than in income taxes, according to a New York Times analysis.

Beginning with the Newt Gingrich-led Republican Congress in 1994, the Earned Income Tax Credit for low income earners and the child tax credit became the political soup du jour. At that time a family of four paid no income taxes on an income of $24,000. As the child tax credit increased by 2010, a family of four with a $50,300 threshold pays no federal income taxes.

It seems to me if Hannity and his Fox News cohorts want more people to pay income taxes, they are arguing against themselves for increasing taxes by reducing the earned income and child tax credits. You can't have it both ways, guys.

Economy watcher Keith Hennessy on his Web site provides a thumbnail sketch how the Republicans with growing help from Democrats brought us to the point of half the country paying no income taxes.

Hannity and his pals say the poorest Americans pay no federal taxes whatsoever. Again, that is not true.

David Leonhardt, writing for Economix Blog, says the poorest fifth of all households pay a net federal tax rate of 4.3%. While income tax was -6.6%, the combined rate of payroll, investment and excise taxes was 10.9%. He suggests 10% of all households pay no net federal taxes. The analysis is confirmed by the Tax Policy Center.

Furthermore, the government considers it all income and throws it in a general fund for later disbursement.

Some conservatives such as Fox contributors Tucker Carlson and Charles Krauthammer call for a VAT (Value-Added Tax) to help pay down the national debt to stave off bankruptcy. The trial balloon ascending   over Washington is because taxpayers in total pay about $2.5 trillion in taxes to the federal government, while the government is spending in excess of $3.5 trillion, leaving a shortfall of $1 trillion “as far as the eye can see.”

The New American says the VAT assesses a three-layer tax on consumers, essentially targeting areas of the economy not in favor of the government the hardest (as in gas-guzzling SUVs). It also would increase the IRS
cost now at $12 billion and increase the size of the tax code already in excess of 100,000 pages. The cost of preparing federal and state tax returns is estimated at $250 billion to $350 billion annually.

The Atlantic fires this salvo at the Tea Party's "aggressive strain of ragweed:"

"Tea Party apologists on TV will explain that what they're really asking for is lower rates and a broader tax base to diffuse America's tax responsibility. But if half the Tea Party doesn't pay income taxes today, a broader tax base -- even with minuscule rates -- would raise many of their taxes!"

University of Michigan economist Mark Perry published a chart on the percentage of people based on income who do not pay federal income taxes. 

Under $10,000 -- 99.8%; $20,000 -- 83.6%; $30,000 -- 61.8%; $40,000 -- 47.5%; $50,000 -- 35.7%; $75,000 -- 21.5%; $100,000 -- 9.7%; $200,000 3.5%; $1 million -- 2% and over $1 million -- 1.5%.

Last year the Gallup Poll reported 48% of Americans saying the amount of federal income taxes they pay is “about right,” with 46% saying “too high — one of the most positive assessments Gallup has measured since 1956.

Let's see, 47% pay no income taxes and 48% thought that what they paid is about right. Can't help but wonder how many are in that same group.

Just asking.

Readers comments are welcome as long as they remain civil. We reserve the right to delete any comments that are vulgar, libelous and totally irrelevant to this posting. -- Jer 

1 comment:

JS Spencer said...

Excellent post Jerry. Long ago (in blog time) I said the Tea Party folks are revved up and angry, but without a good grasp of the real source of their anger or where it should be directed. Most of what I've read about them since (including your recent TMV post) only lends weight to this assertion. It's too bad, since I am a great believe in voter activism (especially if it's genuine grassroots) but activism without a grounding in accurate information is going to eventually burn out or mutate into something counterproductive... or just get absorbed (in this case by the GOP - which would be particularly ironic).