Thursday, April 8, 2010

Interesting and Sad

The last 20 minutes of the first hour, of the Rush Limbaugh show today was very interesting. Here were the topics:

1) Rush read a study, and I can't remember the name...sorry I was in my car and couldn't write it down. Anyway, the conclusion was that there is no amount of taxation in our current tax structure that could be implemented that would allow us to pay down the debt, unless we balance the budget.

Jake's Question - what will Obama and crew do? Since we know they can't stop themselves from spending, I'm guessing they are going to invent new ways to tax the rich (see #2).

2) Rush cited a report, and the report said that 47% of the population now pays no federal income taxes.

Jake's Analysis - That's kinda scary. That means that 47% of the population really doesn't care about any of the financial issues facing our country, because they have no stake in it. These people are the people who vote for the Democrats who promise to raise taxes on the rich and give them more tax breaks. Logically, as we go forward, the amount a rich person makes will have to steadily decrease to support the rising population that doesn't pay taxes. Right now, the number Obama uses is $250,000, but pretty soon it'll be $200,000, then $150,000, and before you know it, if you pay taxes, you will be considered rich.

3) A caller from Pennsylvania talked about his situation. He is unemployed, his wife works part time as a nurse. They made $33,000 last year, and paid $900 in federal taxes. They made some money in real estate several years ago, and own their home outright, Because of this, they are able to live comfortably on his wife's income, plus what he receives from unemployment. When he filed his tax return, using the online tools the IRS recommends, he found out he was getting $2300 back from the federal government. This man received unemployment all year, and then, for all his hard work, the government gave him a $1400 year end bonus.

Jake's Analysis - Ridiculous! Our tax code was written by idiots. Scrap the income tax and go to a National Sales Tax.

4) During the ABC news break at the top of the hour, they were talking about Obama and Russia's Medvedev signing the new nuclear agreement promising the reduction of nuclear stockpiles. While running the news story, patriotic symphony music played in the background. Does anybody remember that happening when George W. Bush reduced nuclear stockpiles in an agreement with Russia during his administration? Does anybody even know that Bush reduced nuclear stockpiles?

Jake's Analysis - What media bias?

3 comments:

mediocre coffee said...

The Gazette reported the same story today (47% of Americans don't pay taxes). Likewise, they also cited instances of people actually claiming enough tax credits that the gov't has to pay them come tax time. Very crazy.

Anonymous said...

You friendly neighborhood liberal chiming in.

I'm not sure it is scary... or sad for that matter. The report Rush is talking about is from the Tax Policy Center. As you say, they find that 47% of Americans don't pay Federal Income Tax.

If you take a look by the numbers, the vast majority of citizens not paying Federal Income Tax come from those who make less than $50,000 per year, 69.5% or 63,500,000 people. After that the numbers go down-
16.5% in the $50k-$100k bracket 3.2% in the $100k-$500k bracket 2.0% in the $500k-$1M bracket and 1.5% in the over $1M bracket
That makes 71,000,000 Americans total. If you ask me, what is sad is the nearly 4% of the population, or 23,000 Americans making $500-to over $1M a year are not paying in. That is crazy... accounting tricks I guess.

Not that I'm saying it's right, but here is the accounting trick to not pay Federal Income Tax if you make under $50,000 a year according to Deloitte Tax:

A family is 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, a family will qualify for two $1,000 child tax credits. A families Making Work Pay credit is $800 if the parents are married and 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.

Accounting... isn't it fun! I have no clue how somebody making over $1M makes that work... maybe they have tons of kids? :-)

I also think it's important to realize that 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. So they don't get away tax free.

According to the US Census Bureau the 2009 median income in the United States (56.5 Million Households) was $52,029. So a mojority of those not paying Federal Income tax are living below, if not far below the average income. The poverty line for 2008-2009 in the United States was $14,570 for a two person household. So of the 47%, you are talking about people living at or below the poverity line. An estamited 38.9 Million people were living at a poverty level in 2008-2009… so assuming that they filed taxes, over half of the 71 Million who didn't pay Federal Income Taxes are living at or below the poverty line. So to me, the fact that in the great nation somebody is living in poverty is sad, not that they are not paying Federal Income Tax... that is the least of my worries.

I’m sure there is more to the story… but this is just my take. I could be wrong.

MCD

Jake said...

Interesting take. I understand about the other taxes. Still, I think it's shocking that we're at a point where nearly 50% of the population isn't paying income tax.

You have proven my point though...the tax code is screwed up. The fact that someone making $500k to $1M can escape income tax is amazing.

To expand on my point, which perhaps I made poorly is that, if you aren't paying income taxes, you have no incentive to really care about our financial system. From itme #1, you realize that our current situation is unsustainable. But, if you don't pay income taxes anyway, then you probably like it when the politician talks about more gov't goodies for you, b/c you have no stake in paying for it.

That's the point...we need to find a way to hold all Americans accountable. We're going to run out of ways to tax rich people at some point. I think a national sales tax is the way to go. You would have to exempt food, but other than that, you are taxed on how you consume. Seems fair to me...and I know that means someone like me faces a higher tax rate than i do with an income tax.