A tax coincidence?

A tax coincidence?

April 25th, 2011 in Opinion Free Press

It's probably safe to assume that most people who pay no income taxes think their tax burden is "fair."

So it seems more than coincidental that with almost half of U.S. households paying no federal income taxes, about the same percentage of Americans believe their taxes are "fair."

The Associated Press recently conducted a poll on Americans' views on their taxes. Slightly more than half said they were paying a fair share. Meanwhile, the Tax Policy Center, a think tank in Washington, estimates that nearly that many got so many tax breaks in 2010 that they had no federal income tax burden.

Now, we do not blame anyone for making use of lawful tax breaks and credits to reduce his tax bill. But if almost half of all U.S. households - a figure that includes millions of middle-class families - have no federal income tax liability because of various breaks and credits, that puts the entire income tax burden on the remaining half of households.

Some defend that inequity by saying that even if many middle- and lower-income earners technically pay no federal "income taxes," they do pay taxes for Social Security and Medicare, just as everyone else does. But in fact, many households escape paying those taxes, too!

About 23 million tax filers in 2010 who already owed no income taxes also got refundable credits from the IRS that were greater than what they paid in Social Security and Medicare taxes. So for them, the federal tax code is actually a source of income, not a means to "pay their keep" for being citizens of this great country.

That means the IRS is "delivering what are essentially welfare benefits to people who don't pay income taxes," The Tax Foundation noted.

"Whatever we think of the IRS, that is generally not a function it should play. ... [T]oo many people see April 15th as payday, not Tax Day."

The Tax Foundation adds, "[N]ot only are these people not paying any income taxes to fund the general cost of government from which they benefit, but they are effectively not paying into the Social Security or Medicare systems [from] which they will benefit in retirement. That's a free ride in any book."

And yet even though millions of wage-earning households have no income tax burden, President Barack Obama and Democrats in Congress are determined to raise taxes on the rich and on small-business owners whom they falsely label "rich."

Raising taxes is the last thing we need to do in a time of high unemployment and rising inflation. Higher taxes would further discourage investment we need to create jobs.

And for all the talk that the rich don't pay their fair share of taxes, the top 10 percent of earners paid more than half of the federal income taxes in 2007, and the top 5 percent paid 44 percent. Plus, what is fair about millions of middle- and lower-income households paying zero federal income taxes and yet receiving the benefit of taxes paid by others?

It has been observed that at some point not far in the future, our nation may reach a tipping point at which most people are not paying federal income taxes. When that happens, they will have the power to vote in majorities in Congress who will provide them more and more benefits - paid for by the ever-shrinking number of people who do pay the taxes.

From there it will be a short trip to national bankruptcy, because the fewer and fewer people who are paying into the system simply won't be able to sustain the costs of the growing welfare and entitlement state.

As U.S. Sen. Orrin Hatch, R-Utah, said at a recent Senate Finance Committee hearing, "You get a lot of takers when you ask people if they want more of something and you tell them it's free."

But as has always been the case, no benefit that government provides is ever free. Sooner or later, the bill comes due. Government can hide the consequences of a huge and expanding welfare state for only so long.