Good news: 47% of U.S. households will pay no income tax this year

posted at 5:57 pm on April 7, 2010 by Allahpundit

I almost stuck this into the “free O-Care” post, but it really deserves its own item. Especially with Tax Freedom Day finally rolling around this Friday.

Read it quick and get back to work. Those “free” entitlements aren’t going to pay for themselves.

In recent years, credits for low- and middle-income families have grown so much that a family of four making as much as $50,000 will owe no federal income tax for 2009, as long as there are two children younger than 17, according to a separate analysis by the consulting firm Deloitte Tax.

Tax cuts enacted in the past decade have been generous to wealthy taxpayers, too, making them a target for President Barack Obama and Democrats in Congress. Less noticed were tax cuts for low- and middle-income families, which were expanded when Obama signed the massive economic recovery package last year.

The result is a tax system that exempts almost half the country from paying for programs that benefit everyone, including national defense, public safety, infrastructure and education. It is a system in which the top 10 percent of earners — households making an average of $366,400 in 2006 — paid about 73 percent of the income taxes collected by the federal government.

The bottom 40 percent, on average, make a profit from the federal income tax, meaning they get more money in tax credits than they would otherwise owe in taxes. For those people, the government sends them a payment.

So generous have those tax cuts for the wealthy been, in fact, that a bunch of hyper-rich liberals who apparently can’t find more creative uses for their money held a conference call yesterday to complain that they’re not being taxed enough. According to Dana Milbank’s piece, based on a teeny tiny sample from a Quinnipiac poll taken earlier this year, as many as 64 percent of families earning more than $250,000 a year support tax hikes against their own demographic. I wonder if we can test those numbers a bit. Let’s see how things are faring so far this year in the deep blue, tax-lovin’ state of Massachusetts:

We have a two-tier income tax in this state, you know. You have the option of paying either at the standard rate of 5.3 percent, or at the old, higher 5.85 percent rate.

As of Wednesday, here are this years numbers, according to the state DOR:

Of 1,840,000 state tax filers, exactly 931 have opted to pay taxes at the higher rate. That works out to one-twentieth of one percent. Think of it this way: In 2000, only 60 percent of the Massachusetts electorate voted to cut the income tax, but a decade later 99.95 percent of the population has decided to take advantage of the tax cut a lot of them claimed they didn’t want or need…

As pitiful as those numbers are, they’re better than they were at this time last year, when 1.831 million taxpayers had filed, and only 731 ponied up.

Exit question: Time for a two-tiered experiment in federal income tax? You could tie it to benefits somehow, i.e. if you choose to pay at the lower rate, you forfeit your eligibility for unemployment insurance. Who’s in?

Update: Ross Douthat scolded me today for last night’s “alarmist” VAT post, so here’s my atonement: Isn’t the inequity of the income tax a good argument for a consumption tax? The VAT’s as close to a flat tax as we’re ever likely to get.


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