How a family of four making $50,000 a year pays no federal income taxes.

[dkf]

"But income tax rates were lowered at every income level. The changes made it relatively easy for families of four making $50,000 to eliminate their income tax liability.

Here's how they did it, according to Deloitte Tax:

The family was 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, the family qualified for two $1,000 child tax credits. Its Making Work Pay credit was $800 because the parents were married 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. That ought to take the sting out of April 15."

http://finance.yahoo.com/news/Nearly-half-of-US-households-apf-1105567323.html?x=0&.v=1

This is the advantage a middle class family gets from the lower taxes we currently enjoy.

[Turbineguy]

1. So who then pays taxes?

It sounds like we're already "soaking the rich".

It all seems more palatable this way doesn't it? We give Joe Sixpack a reduction of $2800 so we can give the fat cats hundreds of thousands.

[Missy Vixen]

6. We'll be paying

After all, we chose not to have children.

Yaaaay! :woohoo:

[eleny]

9. Same here

[DFW]

24. We chose to have children, but they are no longer dependents

Time marches on. They now earn their own way. I pay the maximum Federal rate (thirty-something).

It's stupid, though. If it went back up to Clinton levels, I'd still be OK, so
would most people in my bracket, and the U.S. economy would be in far better shape.

[Go2Peace]

54. The reason this happened was to keep Christian Conservatives happy

It wasn't always that way; the continued rise of exemptions for Children was a political ploy for conservative "values" and part of the ideology that large families are "a blessing". The Christian Right, who have more children per family, directly benefited. Most families in conservative churches pay little taxes but use more social programs than other sectors of society.

The next giveaway has not been yet recognized: The "faith based initiatives" has been used by fundamentalist churches to proselytize immigrants. More than not, of the immigrant community I am involved with where I live go to fundamentalist churches, because those churches help them. Thanks to funds from uncle Sam they are swimming in money to offer members for social assistance. All new immigrants know that the place to get rent assistance and to get into government programs to aid immigrants is through those churches.

I know immigrants who are not "Christian", but claim they are to get help to survive the transition.

[bluestate10]

32. Agreed. Singles take it where the sun does not shine under US tax code.

Always have, always will. I consider taxes as the cost to me for being able to safely live and pursue business interests without having an angry, destitute child off me.

[bbinacan]

19. According to IRS tables

in 2008, the top 50% paid 97.03% of federal income tax.

[Hannah Bell]

27. according to irs tables, in 2007 the top 50% of individual filers took 69.9% of all income.

and 50% went to the top 10%.

and 40% went to the top 5%,

and 24% went to the top 1%.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=439x64696

[Go2Peace]

56. As long as the income disparity is so wide they will continue to. You make most of the income, you

pay the most. What is so hard to understand about that?

[lumberjack_jeff]

29. They do, actually.

Their labor from which the $50,000 income was derived was taxed at 15.3% - without any exemptions. That $7650 is "loaned" to a government (to finance low tax rates) which intends to not repay that debt.

The only place to find money is by soaking the rich. Everyone making less than $50,000/year collectively bring in only about 10% of the income.

[lefthandedlefty]

37. Trucking companies

We have have a 15 percent federal excise tax on new trucks,parts and tires.On a new 100,000.00 truck that is 15,000.00 plus state sales tax add in another 550.00 federal use tax every year,tax on every drop of fuel used plus annual license fees and apportioning fees now multiply that by over 3 million trucks in the US and that is paid even if the truck owner doesn`t make one penny profit unlike other business that pay no taxes if they don`t show a proffit.

[Hannah Bell]

2. in 2007, individual filers making under 32.4k were taxed at an average rate of 13+%,

not too different from the average 20% rate billionaires enjoyed.

if the couple has only one child, they pay taxes.

if they have none, they pay taxes.

if they are single & make $25K each, they pay taxes.

[dkf]

4. Further tax breaks in 2008 and on helped.

"In 2007, about 38 percent of households paid no federal income tax, a figure that jumped to 49 percent in 2008, according to estimates by the Tax Policy Center.

In 2008, President George W. Bush signed a law providing most families with rebate checks of $300 to $1,200. Last year, Obama signed the economic recovery law that expanded some tax credits and created others. Most targeted low- and middle-income families.

Obama's Making Work Pay credit provides as much as $800 to couples and $400 to individuals. The expanded child tax credit provides $1,000 for each child under 17. The Earned Income Tax Credit provides up to $5,657 to low-income families with at least three children."

[Hannah Bell]

8. look, you don't get it. that's 38% of HOUSEHOLDS, not 38% of TAX FILERS.

In 2007 the bottom 50% of INDIVIDUAL TAX FILERS, THOSE MAKING UNDER $32k, PAID INCOME TAXES AT AN AVERAGE RATE OF 13+%.

And in 2008 that same percent of filers paid about the same, despite "rebate checks".

[Auggie]

5. Penalties for being child-free and single

[ZombieHorde]

20. I know I had more disposable income when I was child-free and single. nt

[Go2Peace]

57. Blame it on the Conservatives and blue dogs

That is all part of the "family values" thing and kept lower income Christian Fundamentalists from paying taxes.

[tkmorris]

3. Yeah... and?

I'm not seeing what point you're trying to make. This feels like it belongs in another thread somewhere.

[dkf]

12. The advantage of the Bush/Obama tax cuts to the middle/lower classes is that

They may even get back money from the federal government. If we get rid of all the tax cuts and revert to Clinton rates and credits many will be paying again. I am sure many here approve of the fact that lower income folks get a break on paying taxes right?

[Rex]

44. Actually lower income folks are going to see a slight increase

in their taxes due to the B/O tax cuts.

http://blogs.forbes.com/beltway/2010/12/09/the-obama-gop-deal-a-tax-hike-for-the-working-poor/

[dkf]

46. Or they may see less of a payout from the Federal Government. .

The making work pay credit doesn't equal a single child tax credit. And they will be getting a social security tax reduction to make up for quite a bit of it. Plain old tax credits will be harder to come by under a Republican house. They believe in reduction in taxes, not a payout from the government.

[Statistical]

7. Why should they?

Family income of $50K to support 4 people is pretty tough. Not impossible but hardly rich and not even US median income.

Of course they still pay payroll taxes, excise taxes, telecom taxes, real estate taxes, sales taxes, and possibly state income taxes.

People forget that when the income tax was first enacted it was a tax on the top 5% of Americans. In 1913 the personal exemption was $3,000. That is $59,200 in 2010 dollars. So using income tax system of 1913. The first $59,200 x 4 would be tax free.

Kinda sad we went from a personal exemption (tax free income) of $59,200 to $3,650 and people think the middle class isn't paying enough.

[Obamanaut]

15. Because they derive some good from the federal gov., they should

pay their 'fair share' that we read about that the rich people owe.

[Statistical]

16. They are paying their fair share. Federal income taxes is just one small portion of taxation.

If you want them to pay more in income taxes then end the two dozen or so regressive taxes and replace it all by a single income tax system in which they do pay their fair share.

[Obamanaut]

10. What, no outcry for them to pay their 'fair share'? No federal income tax liability at

all doesn't seem like the 'fair share' one reads about that all the wealthy should pay.

[Statistical]

11. Where do you get this idea there is "no tax liability"?

Federal income tax makes up roughly 20% of total taxation in the United States. So this hypothetical family gets a pass on this ONE tax and still pay:

* Payroll taxes
* Real Estate taxes
* Sales Taxes
* Excise taxes (gasoline, firearms, ammo, alcohol)
* Telecom taxes
* State Income taxes
* Indirectly import tariffs and duties.
* State & Local fees which are essentially taxes (vehicle registration, driver's license, marriage license, etc)

Somehow in your opinion that is "no taxes". So eliminate all the regressive taxes in effect at all forms of government and then we can talk about lower-middle income paying "their fair shares" on income taxes.

[Obamanaut]

14. That is precisely why I edited the post to read "federal tax liability" as soon as I

realized I had left it out, knowing it would be pounced upon otherwise.

If there is no federal income tax owed, there is no federal income tax liability.

If a person receives all sorts of credits, and gets back all the monies withheld during the year, plus maybe extra for 'earned income tax credit', there is no liability, no federal income tax paid.

[Statistical]

17. Which is an utterly meaningless statistic.

Say I cut your "federal income tax" in half but raise all the other taxes you pay so that your total taxation rises 10%. Did you get a tax cut or a tax break?

Looking at just "federal income tax" which happens to be the only progressive tax we have and then saying "poor & middle class" aren't paying enough is the height of stupidity.

Of course they are paying less. The system was designed for them to pay less. 90 years ago they paid much, much, much less. Anyone with less than $60K (in 2010 dollars) income (per person so $240K in the family above) didn't even file a return or have taxes taken from their check.

Total taxation is the only metric that matters and the poor & middle class certainly pay their fair share.

[Chemical Bill]

33. I hate it when income taxes are examined in a vacuum.

My property taxes just went up big time, you think I care about the little income tax cut?

Bill

[notadmblnd]

18. And remember, most of those taxes are deductable if you itemize

on your Federal and it exceeds the standard deduction.

[Hannah Bell]

13. In 2007 the 70 million individual filers making under $32.4K paid income taxes at an average rate of

13%.

according to the irs.

they were 50% of individual filers.

not very different from the 20% rate the 1.4 million filers making over $458K paid.

or the 18% rate those making over $168K paid.

[dkf]

22. Why is the IRS so behind in calculating these numbers for 2008 and 2009?

You would think they could press a button or something.

[toastbutter]

23. I don't get this "not very different "

conclusion. 20% is "not very different" from 13%? It's more than 50% higher. I'm not saying they shouldn't pay more, but what you are saying just makes no sense... to me.

[Hannah Bell]

26. um, because $458K is 1431% higher than 32K? and the tax increase is 53%?

[bluestate10]

34. Tax code has always taxes at a fraction of a % for every $1,000 of income.

A more equitable system would have that fraction increase as the base income increases.

[toastbutter]

41. if the tax increase was 1431%

OTOH, you would be paying far more in taxes than you were making in total income. iow, it would be impossible. Again, I'm not saying tax rates are ideal, but a 50% increase is hardly insignificant.

[bluestate10]

43. Agree. nt.

[Hannah Bell]

47. it's insignificant in terms of historical rates. in 1994 the top effective rate was 26%.

over 11 percentage points higher than the bottom effective rate of 14.8%.


The top rate has been dropped 5.4 points.

The bottom rate has been dropped 1.2 points.

The gap between the top rate & the bottom rate was narrowed to only 7 points in 13 years.

The top 1% got a 20% reduction in their rate.

The bottom 50% got an 8% reduction.

And 1994 was not a historically high-tax era by any means.


I'm really sick of apologists for the robbery going on.

[toastbutter]

49. Great

but I don't see anybody apologizing for it. I simply said that contrary to your claim, a greater than 50% difference is not "insignificant"

That's all

[Hannah Bell]

50. it's insignificant.

1431% increase in income, 50% increase in tax rate.

[Go2Peace]

59. Don't forget about the drop in capital gains, most of which benefits the wealthy

[Hannah Bell]

64. the stats = total effective rate (includes cap gains)

[Hannah Bell]

48. dupe

[toastbutter]

51. To paraphrase...

I don't think you know what the word "insignificant" means...

[Hannah Bell]

52. i don't think you know what 1431% v. 50% means.

[hfojvt]

21. as a single guy making much less, I am not happy about it

At $15,000 in income, my tax bill is about $185 even after the Obama tax credit, which is now, thanks to his surrender, being reduced from $400 to $260 for me, but increased from $800 to $1,000 for the couple making $50,000.

So, to compare

income - FI taxes
$15,000 - $325
$50,000 - (-215)

That does not look very progressive to me.

Of course there are always some DUers with kids who will jump in and tell me that the family's income is only $12,500 per person, as if a family of four has to buy four houses (or apartments) and four cars and their utility bills will be 4 times as much.

When the child tax credit first came into existence it was a mere $200, and I knew then that politicians of both parties would fall all over themselves to jack it up and increase the subsidy that childless people have to pay for other people's kids. "Won't somebody please think of the children???"

[cottonseed]

28. Those "other people's kids" will one day be paying your Social Security. You should be kissing their

asses.

See what I did there? Everyone can be an asshole. You should be careful what you wish for.

[WestSeattle2]

68. Providing them with a free K-12 education isn't enough?! Each

child in this country is gifted by taxpayers, with approximately $100,000 in free education. Requiring taxpayers to further compensate parents with tax breaks is not fair.

When the kids are finally working and paying SS taxes, they should think of it as paying back to the preceding generation what they took for 12 years.

[bluestate10]

35. I have always viewed tax credits and workplace privileges for

parents as a strange concept. Why should someone that chooses to have children automatically get benefits that a person that makes a choice not to have children do not get? The only rationale that I can see is that children become consumers and spend. The survival of the human species argument is bunk, the world already contains more people than nature can serve.

[Go2Peace]

58. Politics and math. Conservatives "values" along with huge income disparity

As long as most of the income goes to the top the lower ranks should not pay as much of the total. Let's not get the cart before the horse.

[LynneSin]

25. Remember, throughout the year they are paying federal taxes on their pay

A friend pointed something out to me once. Like many, I couldn't wait until income tax season because it was great to get that extra $1-$2k each year.

But this is the thing, that is my money and as I pay it (because I was claiming '0' on my W-2 form (or is it W-4), the government was taking the maximum out of my paycheck thus guaranteeing a big check at income tax time. That was always my money, but I just let the government hold on to it for a year. And for that year the government was gaining interest off that money. Sure, it was only a few dollars but imagine now that there are millions just like me in the US that do the same exact thing.

I moved my withholdings to '1'. Sure I still get some money back but more of it goes into my paycheck in the long run.

[Obamanaut]

66. If they pay a small amount in increments to get a larger return, or a larger

amount to get a smaller one and then get EVERYTHING back plus extra because of earned income tax credit, they have zero federal income tax burden. None. That is not a 'fair share.'

[TheKentuckian]

30. I have never grossed 50k in my life and I have NET paid EVERY YEAR of my life that I worked.

Meaning since 15 I have PAID.

I'm tired of the LIE being pushed that the working class and the poor don't pay taxes. I net paid in 90's making 15-16-17 thousand dollars (aka jack apple shit).

I net paid on unemployment even.

The rich pay the lion's share of the taxes but they get almost all the money. The top 20% of earners make much more than the bottom 80%. Hell, the bottom 20% only get 1% of the income and the next 20% only 5-6%, that's right the bottom 40% must scrap over less than 10% of the resources and many of us pay our motherfucking taxes every year. In fact, it has been my observation that the people that bitch the most pay almost nothing or get PAID on the net. Yup, the fuckers that are loving the big refund are the first ones to cry about the burden for their kids. I tell them to return their checks and vote for those who will end them and they get damn quiet.

I'm super sick of tax bitchers. They consist almost exclusively of dumbfucks who soak up the benefits and the people with about every cent of the proceeds of the economy.
Then both groups of assholes go run telling everybody that the people who's backs they are standing on need to sacrifice.

[bluestate10]

40. I don't know what system would work.

I have heard politicians that push a flat tax, with no deductions. But under such a system, people in my circumstances will get away with not paying our fair share. What system do you think would be fair? Understand that people in the top 5-15% wage earners that are shouldering a large amount of the tax burden surely don't want to get screwed disproportionately.

If this will be helpful, making more than $50,000 per year is not as great as you think. Understood that people that are not at or beyond that mark will virulently disagree. But take advice that life is fuller when you learn to appreciate the simple things in life that cost little to nothing. Want to treat your lady to a gourmet meal? Do you realize that by knowing how to cook, you can treat her to awesome gourmet meals every night at home for less than $10 total for two meals, maybe three if you have a child? If nutritious, elegant meals can be done for $5 per person, think of how much you can save, how much happier you would be and how much healthier. Similar economies can be applied to mundane items like laundry, home care and lawn care. People are too fixated on money.

[TheKentuckian]

53. Yeah, some folks are too focused on eating regularly and decently or having a place to sleep.

I would still be able to cook at a million a year. The extra money would not diminish my abilities.

[Foo Fighter]

63. No, don't you get it?

Those that make less than $50,000 per year should be grateful because the system has taught them to appreciate the little things in life and realize what's truly important. They should be thanking their oppressors for teaching them about "fundamental values."

OTOH, the banksters on Wall Street truly deserve their huge bonuses. Apparently they already know what's important so they don't need to learn to appreciate the "little things" in life. Hell, even Obama knows that much:

"Enormous Wall Street bonuses have been roundly criticized by President Barack Obama in the past, calling them “obscene,” “shameful,” an “outrage” and a violation “our fundamental values.” But now Obama doesn’t feel the need to “begrudge” the combined $26 million that the heads of JPMorgan Chase and Goldman Sachs are getting.

In an interview with Bloomberg News, the president said he knows JPMorgan CEO Jamie Dimon ($17 million pay package) and Goldman CEO Lloyd Blankfein ($9 million) and added that many pro athletes take home even more money than Wall Street tycoons, which doesn’t shock him either.

“I know both those guys; they are very savvy businessmen,” Obama told Bloomberg. “I, like most of the American people, don’t begrudge people success or wealth. That is part of the free- market system.”

http://www.allgov.com/Top_Stories/ViewNews/Obama_Defends_Bank_CEO_Bonuses_100212

Uh, apparently that's the same part of the free-market system that had to be bailed out by taxpayers because it failed miserably due to fraud and corruption but hey, those CEO's still deserved their huge bonuses because they're just so damned good at what they do.

So, to sum up, those that make less than $50,000 per year should be damn glad to do so because their lives are so much richer and fuller because of it. And they should also be damn glad to pay more taxes so the top 1% can pay less because if that group had to pay more in taxes, it would surely diminish their quality of life because they wouldn't feel as successful as they truly deserve to feel.

[SoCalDem]

31. The fly in the ointment when it comes to "tax-talk" is this..

EVERYONE has a different circumstance, even if their incomes are "the same".

People have different amounts withheld, so that when they say they "paid" taxes, they are often talking about the check they had to write the IRS (over and above what was withheld).

Some people making the same amount, are in a position to have more put into tax-deferred accounts (401-ks & IRAs), so their taxes owed will be less.

Some people have kids ...some do not...

Some people are able to deduct mortgage interest..others are not..

There are just enough variables, to make any real discussion hard to have without people getting upset, angry, confused..you name it..

The very rich have accountants & tax-people whose sole job is to lessen their tax liability...most of us do not.

Europeans (most of them) actually pay much higher taxes (or so I have read & seen presented in documentaries), but except for the wealthy, most people are okay with it.. why?

because their out-of-pocket expenses for many things we have to pay for are much less, and are a part of their social "contract" with their government.. "we pay you higher taxes, and YOU (government) provide services to US"... services like no muss-no fuss medical care when & where needed, without extra paid... a good education for the kids..all of them ...through college (conservatives are going after this benefit..hard)...old age pensions...unemployment benefits..etc.

In the US, it often seems like we are sending the government money we desperately need, and we are not getting a lot of tangible good things in exchange.

For a family going into more and more debt every year because they don't make enough money, only to see the thousands they sent the government (and may still owe more), it's a bitter pill to swallow.

[Hannah Bell]

36. one of the docs i work with was an anti-tax winger. he went to denmark in a

doctor exchange (a group of docs from each country worked in a hospital in the other country for a few months -- a summer or something).

he came back raving about their system, said he wouldn't mind paying taxes if they benefited "everyone" like in denmark.

and it's true, if everyone got medical fewer people would bitch about the system.

[handmade34]

38. appreciate your rational explanation

when the tax cuts first took place in 2001, I ranted that people would end up paying more for those things we commonly had benefit of...

[DebJ]

60. Some of the 'services' we get are lots of tanks and bombs

and the ability to police the world.........if our military budget was more on par with other countries, we could probably pay for health care for all with the difference.

WWJD with Haliburton and Xe?

[Hawkeye-X]

39. We are on SSDI and also work part time

but at a maximum hours we can reach. I can only earn $1,000 a month along with my meager SSDI. I just wish they would allow us to earn just a *tad* more than that.

We cannot work more than 20 hours a week, and that $1,000 is the maximum as of 2011 (I think) is still $1,000. I could be wrong, but trying to find it is like a needle in a haystack...

[DebJ]

61. My son is in the same position; I understand completely.

If he makes too much, which is peanuts, they will yank his medical benefits, and wham! he would have to pay $800 a month just for meds. So he could never work his way up any ladder, because he'd get shoved right off that ladder when just a rung or two up. He's forced into dependency on the system, and a life of poverty. He lives in Maryland, and to qualify for food stamps, your total assets have to be so ridiculously low that you could not even afford a reliable vehicle (not sure what the total is now, but when I was briefly unemployed and raising two children alone, the max was like $2000 in assets, back in 1990...even then, that would not have allowed one to own a trust-worthy means of transportation to a job).

He was briefly (for a few months) earning about $800 a month this past year. Adjustments/cuts to his food stamps and his SSDI resulted in a net gain of about $100 a week versus his unemployed status. Better than nothing, but sheesh what in the world can one do with all of $4000 a year? For an entire lifetime, in perpetuity.......and he's only 27 now.

[taught_me_patience]

42. I'm strongly opposed to this

I believe everybody needs to pay because everybody benefits from the commons. Everybody pays even if it is 1%.

[CreekDog]

45. they probably pay at least $4000 in FICA and maybe a few thousand in state income/property taxes

if they paid income tax, those state taxes would be deductible too.

and for that, they live in a nation that doesn't guarantee them health care, doesn't keep their kids out of poverty, doesn't guarantee to keep them out of poverty should economic hardship (likely from health needs of possibly just one family member).

what a bargain!

[Pavulon]

55. Depending on where you live that ranges from not a lot to almost poverty.

I do not begrudge someone that. They will be paying other income tax and insurance leaving about $2000 a month after deductions.

[slackmaster]

62. $50,000 is at the bottom of the middle class where I live

The the median income for a family of four in San Diego was $53,060 according to the 2000 census.

According to a report at http://www.signonsandiego.com/news/2010/nov/25/san-diego-housing-affordability-slightly-3rd-quart/, you need an income of $75,500 in order to afford a median-priced home here.

A family earning $50,000 would have a hard time making ends meet unless they owned their home free and clear.

[Hannah Bell]

65. median means half the families of four make more, half make less.

that means $53K is in the dead center of the middle class.

unless you define it in some novel way.

[slackmaster]

67. I've never in my life seen middle class defined in terms of median income

Supposedly right now the middle class in the USA is shrinking, with the wealthy accumulating more as the people formerly known as the middle class finds it harder to get by. If the lower class is growing, the median income would shift downward.

I've always seen the classes defined as tiers in a social hierarchy, with the middle class represented by people who own some property but still have to work for a living.

Hannah Bell, perhaps you can point me to a scholarly source that equates the middle of the middle class with median income.