Who Pays Taxes?

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

By Nick Baumann, Mother Jones

On Tuesday night, Jon Stewart had a segment that summed up what's wrong with how the media talks about taxes. If you don't want to watch the segment, I'll summarize (briefly): All this week, cable news and many newspapers have highlighted a 2009 study by the Tax Policy Center that found that 47 percent of Americans have no income tax liability.

Why point to this study now? Well, tax day is Thursday, the media needed a good story, and the Drudge Report—which seems to serve as the assignment editor for 90 percent of the television producers in America—featured the story on its front page. As you may know, the Drudge Report has an agenda. And as you may suspect, the TPC study is misleading without context. Cable news is terrible at providing context. But this is one of those cases where excluding the context essentially makes the story wrong. Focusing on income taxes when you discuss Americans' tax burden ignores the fact that most Americans pay more in payroll taxes than they do in federal income tax. The truth is that only a very small percentage of Americans pay no federal taxes—and most of those folks are paying at least some state taxes.

When you're talking about tax "fairness," there are really only two stats that matter: the percentage of total taxes that each income group pays, and the percentage of total income that group receives. Behold:

If you watched cable news this week, you would think that the top 20 percent are being treated incredibly unfairly. You'd be wrong. Ezra Klein has a theory about why the media failed so epically:

I'm going to be charitable on this and assume that people are biased toward their own experiences rather than playing loose with the data. For upper-income folks—journalists, television executives, congressmen, think tank employees—the big hit is on income taxes, so they get pretty annoyed when they hear that lots of Americans don't pay any income tax.

But their experience is not typical.

I normally admire Ezra's restraint, but in this case it's not warranted. Even if they're biased toward their own experiences, media figures are really falling down on the job by pimping this study free of context. Call me old-fashioned, but I think the media have a duty to avoid fanning the flames of social division. Giving people the impression that huge numbers of Americans don't pay any taxes is just plain irresponsible. It makes people really angry. Last year, when I traveled to Connecticut to cover the Senate race there, I met a man who believed that 50 percent of Americans didn't pay any taxes at all. Those "zero-liability taxpayers" should be disenfranchised, he said. That's some divisive talk.

As Stewart pointed out in Tuesday's segment, ExxonMobil may not have any US income tax liability for 2009. But that wasn't on the Drudge Report, so cable news didn't cover it. Mother Jones' Adam Weinstein did, however. He even talked to an ExxonMobil spokesman. Check it out.

link

[w¡n9Nµ7 §£@¥€r 123]

Federal payroll taxes are specifically for social security and medicare. These are programs all Americans will be entitled to. Everyone paying these taxes will derive benefit from these taxes, unless of course they die early.

But by not paying the federal income tax, almost half of all Americans aren't contributing towards shared expenses like the national defense, the national park service, interstate highways, etc. Just about all Americans derive benefit from these expenses, yet only half (about) pay into them.

Where's the fairness in that?

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

Federal payroll taxes are specifically for social security and medicare. These are programs all Americans will be entitled to. Everyone paying these taxes will derive benefit from these taxes, unless of course they die early.

But by not paying the federal income tax, almost half of all Americans aren't contributing towards shared expenses like the national defense, the national park service, interstate highways, etc. Just about all Americans derive benefit from these expenses, yet only half (about) pay into them.

Where's the fairness in that?

Perhaps we should eliminate EITC and instead, charge a penalty or higher tax on businesses that pay their employees below a living wage. Then also make FICU and Medicare rates progressive.

The Earned Income Tax Credit, for instance, is an income-support program created by Richard Nixon and expanded by both Ronald Reagan and Bill Clinton. The underlying idea came from legendary conservative economist Milton Friedman. So this is bipartisan stuff. And it was designed to run through the tax code rather than just send recipients a separate check. So if your income is low, you may (1) owe very little in income taxes, and (2) get a check through the EITC. The result isn't that you don't owe anything in federal income taxes, but that your income tax liability is wiped out by your EITC check. The critics of the tax code don't seem to know this, but their problem is with programs like the EITC -- of which there are many, some of which help the middle class -- not income tax brackets.

[Dan J 277]

Federal payroll taxes are specifically for social security and medicare. These are programs all Americans will be entitled to. Everyone paying these taxes will derive benefit from these taxes, unless of course they die early.

But by not paying the federal income tax, almost half of all Americans aren't contributing towards shared expenses like the national defense, the national park service, interstate highways, etc. Just about all Americans derive benefit from these expenses, yet only half (about) pay into them.

Where's the fairness in that?

Life is not always fair.

Those who don't pay any federal income tax come down into a few categories.

1. Poor, don't earn enough to qualify for any tax bracket.

2. Families with children who might not be poor, but are lower middle class. Tax credits and deductions from children eliminate any tax burden. Although it would be fairer to eliminate these deductions/credits since some government benefits do target this group, doing so would be political suicide.

3. In addition to number two. Deductions/credit in a broader sense from self employment or other programs can eliminate tax burdens. (I didn't pay any federal income tax last year, but I qualified for the $8000 first time homeowner credit)

3.

[w¡n9Nµ7 §£@¥€r 123]

Perhaps we should eliminate EITC and instead, charge a penalty or higher tax on businesses that pay their employees below a living wage.

Not all skillsets deserve a living wage.

Federal payroll taxes are specifically for social security and medicare. These are programs all Americans will be entitled to. Everyone paying these taxes will derive benefit from these taxes, unless of course they die early.

But by not paying the federal income tax, almost half of all Americans aren't contributing towards shared expenses like the national defense, the national park service, interstate highways, etc. Just about all Americans derive benefit from these expenses, yet only half (about) pay into them.

Where's the fairness in that?

Life is not always fair.

Nice. I hope this rebuttal is acceptable to you when discussing exploitation of women in the workplace and child labor in Indonesia. Suck it up, bitсhes.

[SMOKE 1,426]

the slayer is in top form today.

[Ali G. 37]

Anyone read this article linked in the OP?

Exxon's US Income Tax: $0

Yet we have people saying we should cut corporate tax even more. ####### At least Walmart: "By contrast, .... paid $7.1 billion globally in taxes, and the lion's share of it—$5.9 billion, or 83 percent—went to the US government."

Edited April 15, 2010 by Ali G.

[w¡n9Nµ7 §£@¥€r 123]

Anyone read this article linked in the OP?

Exxon's Income Tax: $0

Did you perchance read the whole fuсking thing or did you go straight into outrage mode after just reading a headline?

Exxon called MJ and corrected the record. The update is at the end.

But, for the truly lazy, here is the relevant excerpt:

[update: Alan Jeffers, ExxonMobil's media relations manager, contacted Mother Jones to respond to this story, confirming that he had submitted a signed comment on this Web page (see way below). He first sent us an email, which states:

It is incorrect to say that ExxonMobil did not pay any U.S. income tax in 2009. In fact, we expect a significant U.S. federal income tax liability for 2009, although our tax return will not be filed until later this year. Our tax installments overpaid our 2008 U.S. federal income taxes and we used that excess in part to pay our 2009 estimated taxes. The amount stated in our 10-K filing with the SEC, which Chris [Christopher Helman, who originally reported on this story for Forbes] told me he based his story on, includes expenses or credits recorded during 2009, and can represent items from previous years or expectations for subsequent years. It is not our actual tax bill.

doh!

Edited April 15, 2010 by w¡n9Nµ7 §£@¥€r

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

Not all skillsets deserve a living wage.

Ok, so we'll continue to have millions of Americans not having to pay any Federal Income Tax because they qualify for the EITC. Then the rich can continue complaining that they pay too much tax and the 40+ million lowlifes that can't make a living wage have nobody to blame but themselves. Quite a scheme Friedman concocted.

[w¡n9Nµ7 §£@¥€r 123]

Ok, so we'll continue to have millions of Americans not having to pay any Federal Income Tax because they qualify for the EITC. Then the rich can continue complaining that they pay too much tax and the 40+ million lowlifes that can't make a living wage have nobody to blame but themselves. Quite a scheme Friedman concocted.

No one should make a "profit" off of the US Treasury. I am all for progressive taxation, provided no one makes a goddamn profit and no one has a federal income tax liability of zero. Make them each pay a buck, it's symbolic but at least they'll have skin in the game.

[SMOKE 1,426]

No one should make a "profit" off of the US Treasury. I am all for progressive taxation, provided no one makes a goddamn profit and no one has a federal income tax liability of zero. Make them each pay a buck, it's symbolic but at least they'll have skin in the game.

[Ali G. 37]

Did you perchance read the whole fuсking thing or did you go straight into outrage mode after just reading a headline?

Exxon called MJ and corrected the record. The update is at the end.

But, for the truly lazy, here is the relevant excerpt:

doh!

I was about to say. The question is, how much did they pay?

[Jenn! 918]

This is why I think taxes should be based on consumption rather than income (with adjustments to make them non-regressive on income). Really, the people who aren't earning enough to pay federal taxes aren't making enough that they are able to pay them IMO.

No one should make a "profit" off of the US Treasury. I am all for progressive taxation, provided no one makes a goddamn profit and no one has a federal income tax liability of zero. Make them each pay a buck, it's symbolic but at least they'll have skin in the game.

I think that's silly.

[w¡n9Nµ7 §£@¥€r 123]

This is why I think taxes should be based on consumption rather than income (with adjustments to make them non-regressive on income). Really, the people who aren't earning enough to pay federal taxes aren't making enough that they are able to pay them IMO.

They can pay something. They can pay what they'd normally pay to buy one pack of ciggies or one lottery ticket or one dimebag or one of those laughably tiny bottles of Jack.

I think that's silly.

I think it's important to make that a principle - everyone pays. We can be progressive about how much.

[Jenn! 918]

They can pay something. They can pay what they'd normally pay to buy one pack of ciggies or one lottery ticket or one dimebag or one of those laughably tiny bottles of Jack.

Are you not-so-subtly implying that people who don't have any federal tax burden spend their money frivolously? I don't doubt that some (most) do, at least at times.

I'm not into symbolic gestures. It's meaningless. Would you really rest better knowing that the working poor were paying their "share" of $5?