47% will pay no federal income tax

[one...two...tree 2,762]

Dated 3/27/2008

Invest your entire wad in the right kind of munis and you can wipe out your income tax bill when you live off your savings in retirement (earn too much, though, and your Social Security may be taxed).

...

Despite constant loophole tightening, owning a small business is still a license to deduct. Just a partial list of what can be subtracted from income is dazzling: overhead, salaries and depreciation for equipment; a deduction just for making products in the U.S.; and a $2,400 tax credit in the first year after hiring certain disadvantaged workers.

...

But can all of this add up to zero? Brent Kessel, co-founder of Abacus Wealth Partners in Los Angeles and author of "It's Not About the Money," shared a client's return (without revealing the name). In 2006 the income from his client's business was $749,000, with another $226,000 in interest and rental income making the total taxable income $975,000.

But the owner contributed $733,000 to his own defined-benefit pension plan (which will pay him a taxable income in retirement). After deductions, his income tax came to $30,000, just 3% of his total earnings. "That's not zero, but it's pretty good," says Kessel.

That right there...is outrageous. Why would a small business owner be able to contribute that much more than an individual?

Defined-benefit plans have no contribution limits, but they limit the amount of money you can withdraw each year.

Are individuals able to have defined-benefit plans?

[mawilson 2,133]

Are individuals able to have defined-benefit plans?

Self-employed individuals, sure.

Or if you're earning self-employment income aside from your regular job.

[Heracles 417]

Much in the same way China is progressing, as are other developing countries, we need to help build a sustainable economy in Mexico for Mexicans.

How do you suggest we do that? Outsourcing is also taboo, right?

I would start by taxing the ####### out of "remittances" to Mexico and other Latin American countries.

Let the bastards spend the money here, in the USA.

Exactly.

[GabiandVi 34]

It's shocking to me that 69.5% of household now earn under $50K. If anyone thinks outsourcing and cheap prices has been good for America, they seriously need a smack in the head. Or they're in the top 1.5% bracket that are profiteering from it.

Any other country that wants to see what happens when you replace local stores and line your country with cheap walmarts, here you go. Not only does the bottom 47% pay not taxes but they probably use the majority of public services too.

It only gets better when you think of all the illegal aliens both entering and still here that are driving salaries down even more. Give it another 20 years and 80% of American households will be earning under $50K.

I don't understand this to mean that 69.5% of filers earn less than 50K. I understand it to mean that of those filers earning less than 50K, 69.5 pay 0 in taxes. What I find surprising is that it drops to only 17% in the next income bracket.

[NickD 203]

We could join those 47 million, just quit work and go on welfare or something. So we have to pay for their defense and education? And what do we get for that? Not a damn thing. Are those the same 47 million that don't have health insurance we are also paying for? Ever ask why you are working so hard just to have a few cents more?

[SuperDuper! 230]

Maybe the queen was right? "Only little people pay taxes."

[HYENA 4]

i doubt the statistics that so few pay taxes. Maybe few will owe come filing season but not paying? I'd like to see the stats

[SMR 368]

i doubt the statistics that so few pay taxes. Maybe few will owe come filing season but not paying? I'd like to see the stats

Actually, I'm pretty sure this is accurate. If it was just "won't owe by filing season," that's pretty much everybody who isn't self employed, at least in my experience. I wouldn't expect that to go down so much in the 50-150k range, since you have a lot of salaried employees in that range almost all of whom receive tax returns when they file because of the withholding system.

The problem I see here is we are going to a system where the poorer, say, 60% can raise taxes on the richer 40% and lower taxes for themselves. Of course there won't be a vote for that. But politicians can make such changes and expect to stay in power based on the poorer 60% that will keep voting for them.

Maybe somebody doesn't have a moral problem with this, but it actually has an effect on our economy and society. For instance, ever wonder why doctors work less and less (9-3 or 4 day work weeks, etc)? It's because they have no reason to make more money when most of it will be taxed away. I understand some people make some much that they're not going to cut their income to reduce taxes. But lots of professionals, contracted employees, consultants, and small business owners already do this. The problem is you try to penalize people for making lots of money and they will make less money. But they aren't going to reduce their rates, they'll just work less. And really rich people begin to move assets, businesses, and possible themselves to other countries that have lower taxes.

As they say, to make less of something, tax it. Tax being rich, and you'll be left with poor people.

[rebeccajo 14]

It's shocking to me that 69.5% of household now earn under $50K. If anyone thinks outsourcing and cheap prices has been good for America, they seriously need a smack in the head. Or they're in the top 1.5% bracket that are profiteering from it.

Any other country that wants to see what happens when you replace local stores and line your country with cheap walmarts, here you go. Not only does the bottom 47% pay not taxes but they probably use the majority of public services too.

It only gets better when you think of all the illegal aliens both entering and still here that are driving salaries down even more. Give it another 20 years and 80% of American households will be earning under $50K.

The chart does not say the 69.5% of households in the US earn under $50K.

It says that 69.5% of the households earning under $50K pay no federal income tax.

[NickD 203]

Two ways to pay income tax, either directly or indirectly, indirectly is done whenever you spend a buck, as a good share of the buck is paying for a bunch of other people that are paying income tax. Could say that 47 million are not paying direct income taxes, if we were to abolish income tax, you would be shocked as to how cheap everything would be.