Green Room

A Modest Proposal for Stimulating the Economy: Create More Taxpayers

posted at 5:40 pm on December 17, 2010 by

Earlier this afternoon President Obama signed into law the tax compromise he hammered out with Republicans, but not everyone was happy. Neither incoming House Speaker John Boehner nor outgoing Speaker Nancy Pelosi attended the signing ceremony, albeit for diametrically opposite reasons. Boehner’s absence was a protest to the bill’s inclusion of an additional $313 billion of stimulus, Pelosi’s an expression of dissatisfaction that the bill doesn’t stick it to the top two percent of taxpayers.

That idea—sticking it to the wealthiest Americans—has been a liberal mantra for some time now. In September of 2008, then-Vice President candidate Joe Biden said that paying taxes is an act of “patriotism” for wealthier Americans. In the years since, Democrats have spoken in glowing terms of “economic equality,” a concept that dovetails neatly with Barack Obama’s grand vision of redistributing wealth by raising taxes on Americans earning more than $250,000 a year while cutting taxes for the rest.

As the country slips deeper into debt, the notion of everyone paying his fair share admittedly has merit. But instead of targeting taxpayers who earn a quarter million—which includes the engine of job creation, small business owners—why not go after the millions of Americans who pay no federal income tax at all?

Rodney Mock, who teaches accounting at a California University, has proposed increasing the tax base to those Americans who currently get a “free ride” while availing themselves of the same government services as those of us who write checks to Uncle Sam each April. Mock writes:

In 2008, according to the Tax Foundation and the IRS Office of Statistics of Income, there were 51.6 million individual income tax filers with absolutely no federal income tax obligation. That figure means that more than 36% of all Americans filing tax returns paid absolutely nothing into the system.

If that weren’t bad enough, the number of Americans paying zero in federal income tax has been growing substantially over the years. But it gets even worse. Because of the way the current tax system is set up, not only do many Americans pay no taxes, but our federal government (aka we, the taxpayers) actually pay them through “refundable” tax credits.

With an earned income credit as high as $5,666 for taxpayers with three or more children, plus a $1,000 per child tax credit, a couple with two children can make over $50,000 and pay nothing in federal income tax. Does that conform to anyone’s standard of fairness? Concludes Mock:

[R]ather than focusing on extending tax cuts, [perhaps President Obama and members of Congress] would be better served by … creating more “taxpayers,” reducing taxes on those currently subject to taxation and making over $50,000, and preserving the status quo for the über-rich.

Cross-posted at Libertarian Examiner. Follow me on Twitter or join me at Facebook. You can reach me at howard.portnoy@gmail.com or by posting a comment below.

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This i so true, the example posted. The guy in my shop makes a tiny bit more then me and is married with children. All my previous filings were as single and I get a couple hundred dollar return. He pays about the same amount of tax as me, is married with children and receives multiple thousands back. WTH is wrong with this scenario. Everyone should pay the same percent across the board, no credits.

cfooteman on December 18, 2010 at 11:12 AM

Ditch the income tax. Enact a national sales tax, with a very limited and select set of exemptions so that the poor are not beaten up, such as food staples and medicine, health care, a $50,000 exemption on the purchase of a home, or a $5000 exemption on the purchase of a car. Settle for a used Honda Civic? No sales tax. Need that Hummer H2 to impress the neighbors about what a bad-ass you are, or a Lexus for Mom? Pony up. Poor, but want to buy your teenager a $300 pair of sneakers and an iPod? Pony up. Willing to live in “manufactured housing”? Get a break. Need that McMansion? Crack your wallet.
Savings would skyrocket. People who don’t want to pay taxes can avoid a lot, even if they make good money, by living like Silas Marner. Most won’t, but they’ll pay taxes only on the things they insist on having. People who work hard for little money will still have some skin in the game, which they don’t now, but won’t be punished by buying second-hand and thrifty. It’ll go a long way to eliminating an entitlement culture and ensure that EVERYONE participates in funding our common needs.

tpitman on December 18, 2010 at 12:24 PM

But it gets even worse. Because of the way the current tax system is set up, not only do many Americans pay no taxes, but our federal government (aka we, the taxpayers) actually pay them through “refundable” tax credits.

oh, the horror! some people are so poor that the government actually pays them not to starve or freeze to death!!

Are there no workhouses, Hpwaerdneezer Portnoy?

audiculous on December 18, 2010 at 1:10 PM

A most poor man, made tame to fortune’s blows,
Who, by the art of known and feeling sorrows,
Am pregnant to good pity.

Merry Merry and Happy New year, Mr P.

audiculous on December 18, 2010 at 1:15 PM