Need help - Smart Economists, Please!

[Coexist]

I was sent this email from a Republican friend of mine. He is very reasonable and a good debater. I don't know how to answer this one:

"Oh My Gosh! Guess Who Pays NO Taxes?

Fully 32.4 percent of Americans paid no taxes at all for tax year 2004, up from 25.2 percent in 2000, according to a new report from the Tax Foundation. Before you start screaming about the rich shirking their fair share of the federal tax burden, know this: The people who don't pay taxes are primarily low-income, young, female-headed households who work part-time and are beneficiaries of the $1,000 per-child tax credit or the Earned Income Credit.

Tax Foundation economists say that the 32.4 percent who pay no taxes after they took advantage of perfectly legal tax credits and deductions translates into a record 42.5 million Americans. But it doesn't end there. Approximately 15 million individuals and families earned some income in 2004, but it was so little they didn't have to file a tax return. That brings the total to 57.5 million who pay nothing. And we're not done yet. One tax return often represents several people so when the dependents are included in this no-tax sum, it amounts to roughly 120 million Americans or 40 percent of the U.S. population. And that doesn't count the millions who paid just a very small amount in taxes.

The tax-friendliest states in the U.S.A. are...

Here's the rub, according to the Tax Foundation: We have become a nation divided. There is an ever-growing class of people who pay no taxes and a shrinking class of people who do.

What are America's fastest-rising taxes? It's a good news-bad news scenario.

Who are the non-payers? Fully 91 percent of them earned less than $30,000 annually and 96 percent earned less than $40,000. They are young with more than a third under 25 and 54 percent younger than 35. More than half are single women or families where the primary wage earner is a woman. Fully 79 percent are white, 16 percent are African American and 3.2 percent are Asian Americans. (Hispanic Americans are not included in the racial category since Hispanic individuals can be of any race. When they are included as such, 15 percent of those who paid no taxes are Hispanic.)

What does this mean? The Tax Foundation says the findings raise serious questions about the future of the U.S. income tax system.

END OF ARTICLE.

Now I am not saying people in the income brackets don’t need help. I know raising a family with that type of income is VERY hard. What I am saying is that if they are not paying taxes then who is? So you can’t say the rich do not pay taxes. I think this shows the rich are paying the taxes."

[Coexist]

1. I should add:

I am sure that if they did pay taxes, combined they probably wouldn't be as much as if one large corporation was forced to, but he is coming at it from to counter my "the top 1% get tax breaks" argument.

[kentuck]

2. And by not increasing the minimum wage for 12 years...

is a tax on the lowest wage earners....What do they have to keep up with inflation? The make less and less each year. So they pay no taxes?

[AllegroRondo]

3. Thats only income taxes

these people DID pay payroll taxes, like Medicaid, SS, and UE.

[nikraye]

4. the TAX FOUNDATION is a conservative think tank (read: neocon)...

...consider the source.

[BlueEyedSon]

5. People living in poverty SHOULD NOT HAVE TO pay taxes.

(someone tell me if they are paying payroll tax as opposed to income tax)

Maybe the unemployed should pay taxes too? :)

Bush himself sad that trying to tax the rich was futile because they can afford piles of smart lawyers and accountants, and exploit every loophole.

So who is paying? What's left of the middle class, that's who.

BTW, acquaint yourself with the concepts of flat tax and progressive taxation. What we have now in the US is a defacto flat tax after considering the full tax burden, including payroll tax and sales tax etc.

[getmeouttahere]

6. Just because a larger percentage....

of non-payers are poor, does not mean that the rich are paying their fair share. I make less than $40,000 and I had to pay. I don't know ANYONE that doesn't have to pay at least some tax, including single moms I know. Besides, who is The Tax Foundation? What are their political leanings? This could be a big bunch of propaganda.

If you want to believe that the problem with our tax system is that the poor aren't paying enough, that's fine for you. I happen to think that corporations who go off-shore to avoid taxes are a much bigger problem.

[Mandate My Ass]

7. Step 1:demonizing welfare queens, now demonizing working poor

What a bunch of assholes.

[The Magistrate]

8. Try This, Ma'am

The author has played the decrepit bait and switch of conflating federal income tax with taxes. The persons refered to paid, in fact, a great amount in taxes, often on behalf of people better off than themselves.

They paid sales taxes, and that on a great proportion of their limited income.

They paid excise taxes, on utilities, and on a number of goods.

They paid property taxes: if they are renters, they paid them on behalf of their landlords, as that is a substantial posrtion of the rent charged, in all instances.

Thay paid the taxes of corporations who provide and sell the good they purchased, as such taxes are always passed on as a portion of the price charged for articles sold.

These and other items total to a portion of income exceeding that of the portion paid in total taxes of the more affluent persons, who complain so bitterly about supporting the very system they propsper under.

The thing is deceptive nonesense, deliberately contrived to mislead and distort.

[Warpy]

9. These bullshitters never mention OASDI, do they?

40% of the money those single mothers who are going to food banks every month because their paychecks aren't enough to feed their kids is being robbed from them to cover up the DISASTER the tax breaks to the rich have caused this country.

That means a single mother who visits the charity food pantry in the church basement evry month because her job doesn't pay enough to feed her kids is paying 6.5% of her paycheck OFF THE TOP with no deductions, and almost HALF of that is used as INCOME TAX.

That's what these assholes never admit. That's what they're paid to lie about.

[Another Bill C.]

10. I'm not an economist

but it seems he's claiming the poor avoid taxes by not making money -- an option which is equally open to those presently wealthy.

[newportdadde]

11. Ask your friend if he will switch places with them?

Since they have such a great deal :sarcasm:

I know of nooone who doesn't pay some tax, even my wifes friend whos husband makes almost half what I do and also has a kid had to pay some tax. Unless they are including teenagers who dont break the barrier on the minimum amount you have to get to have to file a 1040EZ or something.

Most people have fairly low federal taxes after all deductions. I make slightly above the median salary and once deductions etc are in I was around 9%. Now thats without screwing the system. Two years ago my friend same pay as me, single, no kids got back 3000.00 where as I got back 800, because he had a 'home business' ie tax ripoff, he would charge our lunches against it or charge trips to go see his girlfriend as mileage for the 'business trip' etc. Hell I've read where people charge the whole fucking family vaction to Bermuda against a 'home business'.

The problem with idiots like your friend is they take everything they pay(FICA, CITY etc) around 30% sometimes and lump it all together in their mind and it all goes out in federal welfare checks.

Even if you get out of federal taxes, sales taxes on other items, food etc hit the poor more. If you make 60k buying toilet paper and paying the sales tax on it no big deal. If you make 22k its a bigger deal.

Like I said ask him if he would like to switch places.

[Orangepeel]

12. The WSJ called the working poor "lucky duckies"

because they don't have to pay income taxes. Just think, all you middle class people, all you have to do is try raising a family on mimimum wage and you too can avoid the horror or income taxes!

1) The poor do pay a huge proportion of their income in sales taxes and FICA tax
2) It is middle class families with the big tax burden

[eallen]

13. That's only income tax, and ignores FICA, Medicare, and sales tax.

FICA and Medicare are paid on every penny of earned income, up to the cap. Low income earners typically spend most of their income, especially if they have children, so end up paying maybe 3% to 5% of their income in sales tax. (Their expenditure on rent isn't taxed.)

The bottomline is that most of these people who are paying no income tax are nonetheless paying about 10% of their income in other kinds of taxes.

[Coexist]

14. thanks for all your answers!

[Coexist]

15. ANOTHER QUESTION!!!

He countered with,

"I didn't say they didn't pay anything in taxes, but that the rich pay the largest amount of taxes and therefor deserved the tax break. The rich pay most of the taxes in this country."