NO INCOME TAX PAYERS

A recurring proposal by conservative candidates in the last several election cycles has been to expand the tax base; i. e., we need for those people who don't make enough income to pay income taxes to do so. Why should they pay? Because this relief is seen as unfair. They should pay like the rest of us. Never mind that they pay other taxes such as payroll taxes – FICA and medicare taxes – and sales taxes. Of course this is a question of equality – a central federalist value.

Here is how NBC News describes this tax “break”:

The Tax Policy Center researchers found that about half of the group [of non income tax payers] is basically exempt from federal income taxes because they are low income and also may have a large family. In a blog released not long after its report, the TPC explained that “a couple with two children earning less than $26,400 will pay no federal income tax this year because their $11,600 standard deduction and four exemptions of $3,700 each reduce their taxable income to zero.”

The other half are zeroing out their federal income tax bill with other provisions, such as itemized deductions or the child tax credit. Some are seniors who are living off Social Security. …

Not everyone who pays no federal income tax is in the lower income brackets. A separate report released last spring by the Internal Revenue Service found more than 35,000 people who made more than $200,000 in 2009 also managed to zero out their tax bills. That report noted that it generally takes a number of different credits and deductions for wealthy people to not pay any federal income taxes.¹

This lack of payment, as it refers to the lower end income earners, became a concern when presidential candidate, Mitt Romney, brought up this half of the population in his infamous 47% remark. Actually, the non-payers of income tax amount to about 46% of the population according to the account cited above. But okay; how would these people's lives be affected if they were charged with paying some minimal income tax? Of course, each case is different, but economist, Joseph E. Stiglitz, gives us an idea.

Stiglitz sets up a “typical” situation by looking at a household with one adult earner and two children – as in many single-parent family households. He has the earner working forty hours a week. The person earns just above minimum wage, $8.50 an hour or $16,640 a year. He or she pays $200 per month of his/her $750 per month health insurance bill (the employer picks up the rest). With this deduction, his/her take home pay for the year is $14,240 a year. Stiglitz has the family living in a two bedroom apartment for $700 a month which leaves the family with $5,840 a year to meet all other expenses. Car expenses – owning one is most likely a necessity in most localities in the US – uses up about $3,000 a year for the car, maintenance, fuel, insurance, and the like.² After this expense, the family is left with $2,840 or $3 a day. Now let me go beyond the Stiglitz situation; let's say one of the kids needs a bike to get to school and one day someone steals it or some such event takes place. Stuff happens. AND now let's have them pay some “minimal” income tax.

But didn't the cited article above note that the tax relief is in effect for earners who make roughly $10,000 more a year, remembering that that figure was for a family of four? Yes; that's about another $28 a day for a total of $31. Note that Stiglitz didn't include payroll taxes, clothing expenses, food, educational expenses, some entertainment, medical expenses not covered by insurance (like co-payments), and I suppose there are other things I can't think of right now. If you are in agreement with Mr. Romney, why not, for a few days, run the experiment and see if three members of your family can live on $31 a day. Millions of our fellow Americans have to do so on this or lower amounts. Here is a good time to remember that rates of long term unemployment – being out of work for more than six months – are at historic highs. I know; they wouldn't pay income tax because they have no income.

Let's add another element to this narrative. The comedian, Chris Rock, has, as part of one of his stand-up routines, the differences he sees between having a job and having a career. He begins by making the observation that in a job, one has too much time and in a career, one has too little time. Jobs are usually menial and time drags as one does specific activities such as – and this is his example – scrub those pans. But in a career, one is engaged in engaging work. One gets lost in it and often seems not to have enough time to do all one wants to accomplish. Lower income people have jobs, if they are lucky. But heck; they don't have to pay income tax.

1Linn, A. (2013). The 47 percent: Here's who pays no federal income tax. NBC.com. Retrieved from the Internet, see http://www.nbcnews.com/business/economywatch/47-percent-heres-who-pays-no-federal-income-tax-1B5956488 .

2Stiglitz, J. E. (2012). The price of inequality: How today's divided society endangers our future. New York, NY: W. W. Norton and Company.