Should everybody pay income taxes?
A broad swath of Americans don't pay taxes. Do they have 'skin in the game' in America's success?
In an April 27, 2011 photo, worker Francisco Ortiz talks about his own experiences as he stands outside Sister Jean's Soup Kitchen in Atlantic City, N.J. Most Americans who don't pay taxes are elderly, poor, or unemployed (including people who are too disabled to work).
Mel Evans/AP/File
, a former Government Accountability Office head, thinks it鈥檚 a problem that half of Americans don鈥檛 pay federal income taxes. At the June 22 , he argued that more people ought to have 鈥渟kin in the game鈥 when it comes to paying these taxes so they will be invested in our country鈥檚 future. I happen to think almost all of those people he鈥檚 talking about do have skin in the game鈥攎ore than he or I, in fact.
For starters, most people do pay taxes. As Walker recognizes, they pay payroll taxes, excise taxes, sales taxes, state income taxes鈥揳nd more. Tax reform could easily involve some of these levies, so even people who don鈥檛 pay federal income taxes today could be affected by reform. And please don鈥檛 forget, while today鈥檚 credits and deductions do knock many low-income people off the tax rolls, those in the top brackets reap far greater benefits.
Also, as Eric Toder, people don鈥檛 pay income taxes either because they have no taxable income (almost all of the elderly who don鈥檛 pay income tax, for instance), or because they qualify for credits that offset their tax liability. For the people in the second group, increases in tax rates could very well hit them in the wallet 鈥 either because they鈥檒l owe net taxes or they鈥檒l receive smaller refunds.
The Center on Budget and Policy Priorities recent of those who don鈥檛 pay federal income taxes jibes with 鈥檚. The conclusion? Most are elderly, poor, or unemployed (including people who are too disabled to work). Whom, I wonder, should the tax man put on the block? And how much money is there to be gained by doing so?
The keeps many off the tax roles. But it鈥檚 not keeping wealthy people from paying income taxes. TPC estimates that in 2010, about of its benefits went to households with income under $30,000.
Furthermore, people tend to receive the EITC for at a time. It might move people off the tax role in some years, but not all years. So even many people who temporarily aren鈥檛 paying income tax, likely will in the near future.
If the EITC were run as a spending program rather than a tax subsidy, government could separate its revenue and spending functions. This might diffuse some complaints about people who pay 鈥渘o taxes.鈥 But that sort of thinking overlooks the real . It is administratively efficient, is more accessible to workers than traditional spending programs, and has increased work, especially among single parents. Why fix something that isn鈥檛 broken?
Of course, as a spending program it would be targeted for cost cutting while as a tax subsidy it has鈥攕o far鈥攔emained immune.
At a time when we have a serious budget problem, tax breaks should face the same serious review as spending. But tax breaks for low-income families should not be at the top of anybody鈥檚 target list. No matter what happens with tax reform, I know where my next meal is coming from. At least some of those who avoid federal income tax thanks to programs such as the EITC don鈥檛. Adding to their income tax burden will not help.
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