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  • Government Dependency Grows As "Non-paying" Taxpayers Hits Record Level

    Nonpayer Chart

    The Tax Foundation recently released its annual report on the number of tax returns filed that have no tax liability, and the study shows a record number of “nonpayers” in 2008. Taxpayers become “non-payers” when credits and deductions wipe out any income tax they owe.

    According to the Tax Foundation report, of the more than 142 million returns filed in 2008, almost 52 million have no tax liability. That means more than 36 percent of tax filers paid no income taxes in 2008 – a new record high. This was a steep increase over 2007 when fewer than 33 percent of filers paid no taxes. As the table below shows, the growth of non-payers is a long-term trend that has been accelerating in recent years. For instance, 21 percent of taxpayers were non-payers in 1990.

    The amount of income that a family can earn and still be non-payers is also alarming. In 2010, a family of four can earn up to $51,000 and still pay no income taxes.

    Not only do a record number of taxpayer’s pay no taxes, but many of them actually receive cash payments through the tax code because of refundable credits like the Earned Income Tax Credit (EITC) and the Child Tax Credit. According to the Tax Foundation, cash payments from these two credits alone totaled over $70 billion.

    President Obama’s policies will add to the numbers of non-payers and the amount of income redistributed because he wants to expand and add even more refundable credits.

    Like the Tax Foundation’s report, the Heritage Foundation’s Index of Dependence on Government shows a growing dependence on government and a substantial increase in recent years. According to the report, the average recipient of government aid received over $26,000 in assistance in 2008 – a record high.

    The growing dependency on government and shrinking number of taxpayers is troubling and will lead to an even faster rise in unsustainable government spending unless the trend is reversed. Congress should start by ceasing the expansion of refundable tax credits. It should then reform entitlement programs like Social Security and Medicare before baby-boomers start collecting benefits from them and dependency on government explodes even further. If Congress starts soon perhaps it won’t be too late to stop the impending fiscal implosion.

    Posted in Economics [slideshow_deploy]

    24 Responses to Government Dependency Grows As "Non-paying" Taxpayers Hits Record Level

    1. Brian, PA says:

      It would be interesting to see how many people at the other end of the income scale ALSO have no tax liability because they generate their income from multi-million dollar tax-free investments, or are able to successfully hide their income.

      I urge someone to figure out how much money is not being paid in taxes by mutli-millionaires instead of the measly thousand or two that some poor middle-class laborer could pay if the IRS didn't allow for deductions.

      • Chris_1791 says:

        Those people on the upper end are putting their money to work giving the rest of of jobs, mortgages etc. Where do you think money comes from a tree? No people with excess money make it available at a profit to make the country work. This isn't rocket science to understand. The rich don't hide their money under their beds.

    2. matt says:

      It is to bad Brian does not have his facts, that 5% of the top income earners (the so called millionaires) pay 70% of income taxes.

      • Badguy says:

        But the top 5% have 3 times as much wealth as the 9% below them. They should be paying 75% of income taxes!

      • KLW says:

        Where did you get your info?? They make most of the income and keep most of their income, and don't create jobs. In the last 3-4 decades circumstances in this country have made it very easy for the rich to get richer and the rest of us go no where, look it up. Nothing wrong with making money but it's time to start giving back to the society and circumstances that helped you become richer. A lot of our money problems could be lessened if 15-20 million people went back to full time work. It would be helpful if the useless GOP would get to work and help the situation instead of hampering it and standing in the way. Righties keep repeating the same false crap one of which is Gov. can't create jobs, baloney. Sure they can, all these talking heads in Congress and the Senate have jobs created by the Gov. all their staff and all the people that work for them and around them, the Gov created these jobs and if we start fixing and rebuilding our nations infrastructure would be a great start, but as usual the GOP is standing in the way with zero idea's of their own even though they ran on jobs in 2010. We need to oust the GOP/TeaParty in 2012.

    3. charles Morriston Fl says:

      You are right we cannot sustain for long the rising cost of entitlements. I think also that you make a strong case for either the fair tax .

    4. Tom/Georgia says:

      I have a better idea for what Congress needs to do and what Congress must do.

      Congress must begin to incrementally reduce the amount that is being spent by the United States Federal Government. Else Congress–both Houses together–should make a short fact-finding field trip over to Arlington to begin the process of deciding the most appropriate burial site for Uncle Sam. The excessive spending that is afflicting the old dude will be terminal if it is not remedied.

      Excessive spending and excessive borrowing along with still excessive taxation has made our federal government into an institution of futility that in a number of very important ways has become virtually worthless to the rest of the country.

      Reduced spending is the only possible remedy.

      • KLW says:

        WRONG!!! You can't fix any of this with just spending cut's, pay attention. That's part of the reason we are in this mess. No more corporate welfare and benefits and the rich need to pay their fair share, we need revenue also. The rich have taken advantage of all this long enough, now it's time to start helping.

    5. ann kitay fulton, tx says:

      I have mixed emtions about being a 'non-tax payer'. Years ago – about 50- I was renting a house in Houston where I lived with my 3 daughters and mother who was recovering from cancer surgery. I worked for $250. monthly – gross. At the end of the tax year I was hounded by IRS because they wanted the $82. refund they had sent me. They got it but – As I spent my meager income I knew my landlord had to pay taxes on the monies he received from me. On SSA currently I have yet to pay income tax though I am sure it will be forth coming. We did not have all these agencies back in the day to use as a crutch; we just became more adept at pinching pennies. To this day I still do not approve of all the assistance coming from government agencies. People simply need to learn to stand on their own feet and get on with it. By the way – when food stamps first came out you could buy a $100 worth of food stamps for $70/80 dollars. Why was that changed? Why are so many people on Disability when they still work on the side unafraid of being caught. Why disability in the first place!

    6. Brian, PA says:

      If you read my OP Matt, you would see that i don't reference any "facts". I merely ask a question! However, you must be a DittoHead as this is similar to the theory that the Brainless Wonder has used relentlessly for quite a while. So let's take a look, shall we…

      It would stand to reason that the more income you have, the more taxes you will pay. Therefore if I make a million bucks the actual "dollars" that I pay in taxes should be much higher than the actual "dollars" that someone making $51k makes. Only stands to reason.

      Now, if you scrap the existing system and go with a flat tax, proposed by many conservatives, wouldn't you have the same problem? The people that have more income pay more dollars in taxes. The only difference would be that if the plan were revenue neutral and everyone pays the same rate, the burden would fall more on the shoulders of the middle and lower classes. Right? This is because if revenue neutral, the tax rate would have to exceed the minimum rates now in order to bring down the higher rates. Simple math.

      Plan B. If you scrap the existing system and go with the FairTax (which, by the way, I support), the same would be true again! High income earners would spend more than low income earners and therefore would pay more dollars in taxes. Right?

      No matter how you look at it, the people with higher incomes will simply contribute more dollars in taxes than people with lower incomes. And consequently, the proportion of the overall taxes paid by high incomes will exceed the proportion paid by those earning lower incomes.

      I sometimes look at the this and wonder if what people really mean is that they want a "living tax". That being everyone pays exactly the same dollars every year regardless of their income, expenses, etc. Is that that you really want?

    7. Drew Page, IL says:

      I believe that facts and figures would be wasted on Brian in PA. He strikes me as one of those guys who believe that anyone who makes $20,000 a year more than he does is "rich" and therefore should have all of his income confiscated by the government until everyone else makes as little as he does.

      The fact that someone else is smarter than he is, has worked harder than he has, has taken more risks than he has and has become wildly more successful than Brian has, is irrelevant to Brian. In 2007, the upper one-tenth of 1% of all people filing income tax returns paid 20.19% of all income taxes. The upper 1% of all people filing income tax returns paid 40.42% of all income taxes paid. And the upper 10% of all people filing income tax returns (those with Adjusted Gross Income of $113, 018 or more) paid 71.22% of all income taxes. Those in the lower 50% of all earners filing income tax returns paid 2.89% of all income taxes paid in 2007.

      Yeah Brian, it's all those nasty "rich" people that aren't paying any taxes that makes life so unfair for guys like you.

    8. greg, florida says:

      hey brian from pa, check out the "top ten charts of 2009" above. i bet you are waiting for your tax rebate check from the government? wish i was, i have to pay 10k to uncle sam for working full time, and pick up some extra work when i can.

      i would like to get some money from the government for being lazy and not working as hard as i can to afford the lifestyle that i live, but i work for a living, save my money and live within my means. i have to pass a piss test to keep my job, so tell me why people who collect welfare, foodstamps, section 8 and all the other government handouts don't have to do the same?

      bet you voted for obambi.

    9. Al Wunsch, Fl says:

      Better yet, let's implement the Fair Tax (of course reducing the fed budget to 2007 levels or better yet to only what the constitution calls for and quit intruding on State business). Fair Tax solves a lot of problems by taking away the need to file income taxes every year, eliminates all the other taxes we currently have, eliminates the question of who or what is tax deductable, frees up business to better compete and draw insustry back to the U.S.A., eliminates the need for charitable or church organizations to be concerned about free speech compromising their tax status. It changes the politics in congress regarding lobbyists who currently push for tax credits or congress playing games on spending with tax loopholes. Congress would still set the tax rate. It also levels the playing field. By the way, I sure do get tired of those criticizing people who make more money or who think everyone should pay the same etc. We used to celebrate success.

    10. Diane M Walker, Lees says:

      as a tax accountant, i have long been aware of the dependency on government and seeing hundreds walk out of our office with 'refunds' for thousands – maybe they paid in a little and maybe not. i have seen the system "worked" by able bodied young healthy people that it should never have been intended for. that is one thing – social security is quite another. i take great exception to the notion that receiving social security/medicare is receiving an entitlement program payment – folks are receiving their own money back – the government pays an obscene low rate on that 'borrowing'. i am aware we could have an expanded conversation about folks living longer and receiving more than they contributed and i would argue that they would have on average had a much bigger nest egg had they the freedom of choosing where to invest it during their working years. it isn't an entitlement program if it's your money. it was the government that 'entitled' themselves to low interest loans if it's anything. please quite referring to social security payments as an entitlement program – it isn't correct.

    11. Pingback: Think Tax Day Is Expensive This Year? Just wait. | The Foundry: Conservative Policy News.

    12. Barry, Kansas City says:

      Its amazing to me that everyone here seems to be ok with 5% of the population owning or controlling 70% of all the wealth. Is that just? That is the legacy of trickle down economics. I guess its ok that 95% of the people should survive on the 30% of the economy that has not yet been privatised. Good luck. If you can't see the problem staring you in the face, then you deserve to be the slaves that you are and will become.

    13. James Walls says:

      American Dream——You are young, smart and create a business based on these skills. You borrow money from a bank to test your theory and after a few years you hit the big time. Should you be made to share your wealth with those that sit back and wait on entitlements or do not seek the American Dream.
      Sam Walton—Walmarts was started by him after WWII. He was a Captian in the Army that took all of his back pay and started a Walmart store next to the five and dime stores that tried to put him out of business. He saw the advantage to buying in quanity at a cheaper price, so he could sell cheaper. After his death, none of his sons wanted to run the business until the family almost lost it. One of the sons fired the CEO and took charge. He gambled with the idea of creating a Super Walmart for the people to have a one stop shopping place. To do this he had to build distribution warehouses nation wide, plus buy a fleet of trucks and drivers to save on cost.
      Many people do not know but he placed Walmart in a position that his family could have lost everything if his idea did not pan out. He created his own banks, credit cards and Logistical / transportation network to save overhead expenses.
      Well it worked—-How would you like to place your home–your bank account and everything you own up for security on an idea that you was testing. Wrong, you lose it all and file bankrupt—Right, you reap the rewards.
      Now should the Walton family share their dream with the people—The people did not share the gamble—the stock holders that believed he could do it received the rewards.—You see he allowed the employees to buy stock in the Cooperation as well as people on Wall St..

    14. Matt2 says:

      This is an interesting debate that may go on forever. Should you pay based on what you earn or what you use? It depends on your point of view of course. All people use or benefit from the roads, military, education system, medicaid etc. But not all pay into the system. Is that fair? Millionaires that pay no income tax are about 1400. Middle class and below that pay no tax exceed 30 million. So do you raise taxes on the 1400 or the 30 million? They all use the services and roads. Seems to me we want to talk about the rich not paying but is not really the problem is it.

      • matt knows taxes says:

        You are wrong Matt2. The roads are already paid for with gas tax, vehicle registrations, vehicle inspections and traffic fines among a few of the burdens charged upon us all for using the roads. The schools are paid for with property taxes and hospitals too as well as emergency services. The fact that these gov't agencies continually overspend and always want more stolen money from the rest of us has reached a point of enough is enough. The people who have read the tax code know that almost everyone paying these income taxes is not legally required to.

    15. Matt knows the truth says:

      I wish people in the media would learn the truth or at least if they know this then print it to be fair. The idea that the top earners pay the most in taxes is baloney. They may pay a little bit in income taxes, which is not happening with a good accountant or a reading of the book titled "The truth about the income tax code in America" by Pete Hendrickson. But the fact is that we all are paying far too much on our everyday purchases. Just add up the taxes collected from the federal gov't alone on any thing to do with oil. Then add in the state and local cut. And don't forget all the "hidden" tax we pay that gets paid via the companies being taxed for their work that pass those costs to you and me.

    16. matt knows taxes says:

      The only things that the ultra wealthy can claim as them paying more taxes than the rest of us is on extravagant luxury items like personal yachts and hand made cars and rocks so large they make a woman walk slanted to one side. If you can read this, you are paying more than your fair share in taxes. The gov't needs to downsize big time right now immediately. Cut all gov't pensions to zero and end all those entitlements they have. They are supposed to serve, not be served.

    17. matt knows taxes says:

      Legally, most people do not have to pay income tax but they do because they do not understand the actual law codified on the books. "The income tax is a voluntary tax." Ever hear that before and wonder why "voluntary"? It is b/c you state on your return yourself what amount you wish to say is taxable income. Just b/c you do not understand the law is no reason to think you actually owe those taxes. Read the tax code and it will probably fool you into thinking you are liable for those taxes. But learn to read it correctly and you will find you are not required at all to pay those taxes in almost all situations. Hint, income one obtains from a gov't agency or favor or leg up is taxable. All private money is non taxable. Learn the definitions of words used and phrases used in the code. It is all there, you just have to read a lot of boring stuff to learn it.

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