Thursday, August 19, 2021

A Wagon Headed Towards The Cliff

We often hear that in any tax legislation that "the rich" benefit disproportionately.

They supposedly get most of the tax cuts.

Perhaps that is because they pay almost all of the taxes.

A new study from the Tax Policy Center of the Urban Institute and Brookings Institution (a liberal think tank) puts that claim into better context.

In 2020, 107 million households in the United States paid no income taxes. 

That is 61% of all the households in the United States.

A good percentage (over one-third) of those actually got refundable tax credits. That means they got a refund check from the U.S. Treasury even though they paid no income taxes during the year. 

There were only 69 million American households who paid any income tax in the United States in 2020 in a country with 330 million people and 176 million households.

Yes, it was a tough year for many Americans. Many lost their jobs early in the year. Many business owners and landlords saw their incomes decimated.

However, the trend of fewer and fewer Americans paying any income taxes has been going on for a long time.

The numbers below just take account of households that filed a tax return with the IRS. The number above takes into account all households. 

In 1969, only 13% of Americans did not pay any income tax who filed a tax return.

In 1980, that number was 21.3%

In 2000, it was 25.2%.

In 2017, it was 32.1%.

in 2020, it was 61% of all households that probably equates to just over 50% of taxpayer households.

In 2021, thanks to the new refundable child tax credit that provides $3,600 for every household with a child under age 6 and $3,000 for every child between age 6 and 17 it is estimated that 57% of households will pay no income tax.

Those payments are already being sent out on a monthly basis of $300/month and $250/month to every household with children beginning in July. 

A household with four children-ages 3, 5, 7 and 9 are getting $1,100 every month. The advance payments are only being paid for half the year. The remainder will be paid when the parent files their income tax return for the year.

Although it is called a "tax credit" it is paid even if there are no taxes owed for the year when the household files its tax return. 

Due to this provision, it is estimated that 70% of all families, and 84% of single parent households, will not pay any income tax in 2021.

The cost to the federal government for providing this money---$15 billion per month or $180 billion for the year.

The child tax credit is supposed to revert to a $2,000 annual amount in 2022. Let's see if that happens. It is never easy taking money away from anyone. That is especially true in an election year.

Who is paying the taxes?

Who is pulling the wagon?

The top 1% of income earners paid 40.1% of all federal individual income taxes in 2018 (the latest year in which the IRS has released data).

No, they didn't pay their fair share. They paid double their share of the income they earned. The top 1% reported 21% of the income but paid 40% of the tax.

The top 50% of income earners paid 97.1% of the total income taxes in 2018.

The bottom 50% paid 2.9%.


In that 61% of all households paid zero income taxes in 2020 it is not hard to project that the top 1% in 2020 paid close to half of the tax tab and the top 50% had to have paid close to 99%.

Think about these numbers as we consider everything else we see going on today.

How is it possible for the United States to remain a representative democracy when half of the households in the country are not paying any taxes?

How can a nation survive if over half are taking and less than half are making ALL of it possible?

Great thinkers in the past have stated that it cannot be sustained.

We are getting dangerously close to determining whether they are right.

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