What if most Americans didn’t owe any income tax? Would April 15 still be the object of scorn and derision? Well, that’s exactly the direction we’re headed in.
A new study from the Tax Policy Center says about 47 percent of American households won’t pay any income tax in 2009.
That’s as a group; some of those individuals will pay income taxes. And, of course, almost everyone has to pay other types of taxes.
The U.S. has very generous standard deductions, which keep a lot of lower-income people from paying. And we have a number of income-tax breaks, like refundable tax credits, which will actually hand money back to individuals if the amount of the tax credit is more than what they owes in taxes.
Thus, many in the bottom half who pay no taxes actually are net recipients of federal tax dollars. They get more money back than they pay in.
And more programs are on the way. In 2014, President Obama’s new health care reform will begin providing a subsidy to buy health insurance to families making up to 400 percent of the federal poverty level. That’s about $88,000 for a family of four today.
So in the relatively near future we may have a system in which half or more of Americans pay no income tax. And many will walk away from April 15 with even more money in their pockets, which of course comes from other taxpayers.
But it’s not a good situation when more people are riding in the wagon than pushing it. The top 1 percent of income earners already pays more income tax than the bottom 95 percent. And President Obama is building on that trend by making the wagon even bigger.
You can create a democracy where the few subsidize the many; you just can’t pay for it.
So we have a kind of anomaly: the less scary April 15 becomes because so many Americans pay no income taxes, the scarier it is for America.