The Myth Of Income Tax Freeloading

[underpants]

The Myth Of Income Tax Freeloading

http://www.forbes.com/2010/04/15/subsidies-income-tax-transparency-opinions-tax-day-10-contributors-len-burman.html?boxes=opinionschannellatest

The percentage of people who don't owe income tax is especially high for a couple reasons. First, the recession has slashed many families' incomes, cutting their regular tax liability and making them eligible for income supports like the refundable child tax credit and the earned income tax credit (EITC). When the economy recovers, some will reenter the ranks of the taxed. Second, some of the economic stimulus measures, such as the "Making Work Pay" tax credit, were put forward as temporary measures to boost spending. If all the recent tax cuts are allowed to expire, income tax liabilities at the bottom will go up significantly.

Of course, income taxes are only part of the tax burden families face. For most people, Social Security and Medicare payroll taxes are bigger than income taxes. And state and local income, sales and property taxes hit lower-income families hard. The vast majority of Americans are paying taxes in some form.

But the 47% statistic also highlights a major change in our tax and transfer system over the past 30 years: Many social programs that would have been provided by program agencies like the Department of Health and Human Services are now delivered by the IRS. Consider that the EITC, the cash-assistance program for working-age families, is about as big as Food Stamps. More families benefit from the child and dependent care tax credit than from Head Start or subsidized child care. More families with children in college are eligible for college tax credits than for subsidized student loans or Pell grants.

I have a simple proposal: The IRS should report back to taxpayers what they paid in taxes and received in subsidies. (1) How much tax did each family pay in total and as a share of income before considering credits, exclusions and deductions? This would show that the vast majority of working families are shouldering a share of income tax liabilities. (2) What was the value of those credits, exclusions and deductions? This would show that families at all income levels are receiving a lot of welfare through the tax system.

[Klukie]

1. K&R