Taxation and the condemnation of the poor

By Gloria Vollmers, Special to the BDN

Posted Nov. 28, 2011, at 5:44 p.m.

Pundits and politicians continually repeat the refrain that 46 percent of American households — 76 million returns — do not pay federal tax. A phrase frequently used is that they “don’t have any skin in the game.” These provocative words are usually expressed to suggest that these Americans are evading tax or that they are losers who avoid working.

Who is not paying tax? A large proportion is the working poor. Tax law, written by Congress, entitles everyone to a personal exemption of $3,700 and a standard deduction per household that varies based on marital status. These exist to provide a subsistence amount of tax-free income to a family. This amounts to $26,400 for a family of four and $9,750 for a single person in 2011.

Of the 76 million nontaxpaying households, 38.2 million do not pay tax because of this. A family of four living on $26,400 is not doing well.

What about the other 37.8 million? Congress smiles upon families. There are two credits related to children. One is a child care credit that allows families with children younger than 13 to deduct some of the cost of child care. Congress also added a $1,000 per child credit for children under age 17 — signed into law by President Clinton and renewed by Presidents Bush and Obama. A credit is a direct reduction of tax liability; 11.5 million households pay no tax because of the addition of these credits on top of the standard deduction and exemptions.

Examples for 2011:

• A married couple with two children (ages 15 and 7) earns $50,000. The couple gets a standard deduction of $11,600 plus four exemptions. Taxable income equals $23,600 and their tax liability equals $2,690. Now deduct $1,000 per child for the child tax credit and up to 2 percent of gross income equals $1,000 for the child care credit. The result is a $310 negative liability. This couple owes nothing and will get a $310 cash payment from the government.

• A single person earning $50,000 will end up with $40,500 of tax income and $5,650 of tax liability. This person pays more because of a smaller deduction, only one exemption and no tax credits.

Both households did pay Social Security and Medicare taxes of $3,755 ($50,000 times .0751). They paid sales tax on most of their purchases unless they live in a state without sales taxes. They also pay property tax directly if they own a home and indirectly if they rent.

Among the elderly, 16.8 million households have no tax liability. Those over 65 or blind receive additional partial exemptions. A retired person who only receives Social Security benefits pays no federal taxes. A working retiree may trigger a partial tax on those Social Security benefits but no more than 85 percent of them will ever be taxable.

The combination of an extra standard deduction, the Social Security exclusion and a credit for the elderly accounts for moving these households into the non-federal-taxpaying group. These people are truly poor. Almost 10 million of these households have incomes below $20,000.

This accounts for 66.5 million of the 76 million no-liability households: 38.2 million working poor, 11.5 million families with children and 16.8 million poor seniors. The Urban-Brookings Tax Policy (July 2011) paper includes data about the remaining 10.5 million.

It is worth noting that everyone who purchases anything is paying some of the income tax of the seller. To make a profit, sellers have to cover all their costs. The prices you pay as a customer are paying for the taxes (and other expenses) of the seller.

It would be nice to hear less vilification of the poor. This is the true class warfare – condemning the poor, the underemployed and the unemployed for their low incomes, claiming that the well-to-do are carrying all the burden of federal taxation.

Remember this: if all 66.5 million of these American households (representing almost half our population) were unable to buy anything, our economy, which is based on buying and selling things, would collapse.

Gloria Vollmers is a professor of accounting at the University of Maine.

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Anonymous

When you watch the GOP presidential debates and they talk about broadening the tax base, they’re talking about raising taxes on the poor. That’s the real class warfare.
Anonymous

Seems to be a lot of the normal commenters nowhere to be found on this story. EJ? Where are you, buddy?
Anonymous

‘Blaming the poor’ is a bit of a straw man. The fact is that a substantial proportion of households have no federal tax liability because Congress has exempted them, just as Ms. Vollmers has said. They are not to blame, but they do form a large pool of federal voters for whom runaway federal spending has immediate benefits and no immediate costs. To not see this as a likely source of great mischief requires wilful blindness.
Anonymous

Buy American. Put America back to work and all these problems will go away. We can’t continue to point the finger in the wrong direction and wonder why we are not coming out of this mess. The American consumer is the culprit, not the pols or the evil corporations. We could turn our economy around, put Americans back to work and off of the dole, and put a boot in the butt of the top 1% by simply turning everything over and see where it was made before we buy it. We can’t keep flocking to WalMart, Kmart, and Target to buy all that cheap Chinese crap and wonder why there are no jobs here in America, it makes us look like rubes. Like the guy who was the head of CalTrans once said. Want to know who is responsible for traffic jams and gridlock? Look in the mirror. Want to know who is responsible for the lack of jobs and an economy that is in the dumpster? Look in the mirror.
http://pulse.yahoo.com/_7T3YNF6MG3FPEAVTFIJC44VQUI Dlbrt

Remember this: if all 66.5 million of these American households (representing almost half our population) were unable to buy anything, our economy, which is based on buying and selling things, would collapse.

It Has!
http://pulse.yahoo.com/_7T3YNF6MG3FPEAVTFIJC44VQUI Dlbrt

runaway federal spending

Like Wars in the Wrong Countries?

Medicare give aways to giant Pharmaceutical companies?
Anonymous

And like giveaways to failing businesses and unions (and, just coincidentally, political donors) “too big to fail.” Glad to see you’re adopting the Tea Party position.
Anonymous

Thank God for the hard working rich people keeping our country afloat.
http://www.facebook.com/people/Cecil-Gray/1027119962 Cecil Gray

Fox News: Rich people paying rich people to tell the middle class it is the poor’s fault.
Anonymous

“giveaways to failing businesses and unions” Perhaps I’ve misunderstood you but are you claiming that the federal government is giving unions bail out money? That’s a very surprising statement.
Anonymous

The conservative mantra that 50% of US citizens don’t pay any taxes and are sucking the life out of the economy is not true, never was true, is simply a hateful repetition of the Grover Norquist school of class warfare and represents totally undisciplined thinking.

Years ago people who exhibited such marginal thinking skills seldom got their views published and learned to keep their ravings to themselves. Why do we listen to them now? How is it that this kind of thinking has overwhelmed most rational, logical, fact based reasoning.

We are living in an age where fools are considered sages.
Anonymous

And all those people working two minimum wage jobs, skimping on basics and trying desperately to make ends meet……… they aren’t hard working?

Define “hard working”.
http://www.facebook.com/people/Cecil-Gray/1027119962 Cecil Gray

Thanks for a load pal.
Anonymous

Is that what you call what our country is doing now? Staying afloat? I sure wouldn’t get in a boat with you at the helm…..
Anonymous

You thought the GM and Chrysler bailouts were for the sake of the corporations?
Anonymous

No money ever went to the unions. How saving jobs held by union and non union alike was tortured and twisted around until saving the auto industry was somehow contributing bail out money to unions is somewhat of a mystery to most rational people.
Anonymous

These constant snide, dishonest attacks misrepresenting what “rich people” and “Fox News” are claimed to say is not helping anything.
Anonymous

People who don’t have money could not possibly account for the enormous sums of money being lost to the taxes taken by the government. The tax burden, including income taxes and all other taxes, does impose enormous costs on production that hurt everyone; that does not mean the “poor” are paying the income taxes for those who do have something to take. Wealth is produced, not taken from those who don’t have it.

The answer to the crushing burden of government on productive activity and our personal lives is to lower the taxes and get rid of the interference, not impose more for collectivist redistribution of whatever is left before it is gone forever. It is in fact a major problem when a half the population can, and are told, to “vote” to impose taxes on others because it doesn’t hurt affect their taxes. That guarantees the destruction of freedom and the economy for the sake of permanent dog-eat-dog pressure group warfare imposed by brute force. It is the end of America as a free country, which is what the left wants.

Contrary to this leftist professor author, reducing statism and restoring freedom to the country is not “vilifying the poor” and it is not “class warfare” — the destructive class warfare promoted by leftist politics fanning envy and resentment to get one group to savage another is causing more poverty and dragging us all down to a lowest common denominator. That is why so many people at all levels of ability and income are increasingly on “strike” against oppressive government.
Anonymous

These comments look pretty realistic to me. Does the truth hurt?
Anonymous

Only three stereotypical use of “left/leftist”? Sounds like you’re not trying hard enough.
Anonymous

This is not about savaging anyone. It is about responsible citizenship. Each of us paying our fair share….. in taxes, in wages. Did you miss the last couple of press releases that reported how many more American families had slipped into poverty? Could it be that public assitance wages ensures that the poor will stay poor. Oh, yes, it is class warfare. And, no amount of deflecting attention away from that fact will hold up long.
Anonymous

Yup, that sounds like class warfare to me. And, indeed it is what we hear. Need I go find that article which states it quite clearly from the right?
Anonymous

Um, haven’t you noticed? The country is sinking slowly into a quagmire. Me, I apprecitate the Patriotic Millionaires that are petitioning Congress and The White House. They see what is happening. So does this member of the 1%: http://www.commondreams.org/video/2011/11/19#.TtEpbUCYkOw.facebook . Sorry, more and more people see what you fail to.
Anonymous

I could not agree more. We can vote with our dollars. Ask for and buy Fair Trade/Labor products. Our own greed for cheap, cheaper, cheapest has contributed to the mess we are in.
Anonymous

True. But Congress also has provided a great deal more for corporations whose profits soar because of what is now called corporate welfare. They have gotten obscenely wealthy because they have subsidies, tax shelters, a unliveable minimum wage, etc. and all on the taxpayers dime. To not see this as a likely source of great mischief requires willful blindness and a bit of deceit.
Anonymous

70% of our GDP is based on personal consumption.
Anonymous

The terms refer to those who are or lean towards collectivism and statism.
Anonymous

I reject your premise that “responsible citizenship” means sacrificing people to the collective and that “fairness” means egalitarianism, not in a country based on freedom and the rights of the individual. There is no such duty. We are not part of your tribe. The left most certainly is savaging people in its overt class warfare. One person’s productive success is not the cause of others’ poverty. Far from it. Reducing everyone to a lowest common denominator and controlling everything in sight in the name of “fairness” is going to cause a lot more poverty than we have now. We are not “slipping”, we are being pushed.
Anonymous

Fox News is not “rich people paying rich people to tell the middle class it is the poor’s fault.” You are confusing the “realistic” with leftist slogans.
Anonymous

Fox ooze is mindless drivel of the Extreme right with little balance and pseudo facts driven by talking points of the Extreme collective, something akin to fascist propaganda. But in all fairness it provides excellent comedy when compared to reality.
Anonymous

No doubt you’re not part of our “tribe,” especially one that contains any humans. Being that you’re part of a “rabid pack” you might want to check your political dog tag and make sure it doesn’t indeed read fascist. Though there are many forms of bromhidrosis, the form you suffer from (stink foot) can easily be avoided by occasionally removing your jackboots.
Anonymous

But Congress also has provided a great deal more for corporations whose
profits soar because of what is now called corporate welfare

True enough, but my original point was that the “source of great mischief” is Congress’s exempting a large part of the public from paying for such largesse. It isn’t the fault of those exempted, and no one is making that claim: rather, the Left is falsely accusing the Right of doing so. The bit about unions was in response to msallyjones’s objecting to my including unions in the line “giveaways to failing businesses and unions.”

I don’t really think we’re on opposite sides, here.
http://www.facebook.com/people/Cecil-Gray/1027119962 Cecil Gray

No claim about it, just truth.
Anonymous

LOL@ removing the jack boots. Good one, really good one.
Anonymous

I’m betting you can’t define statism and collectivism. I’m guessing you are just repeating something you read from the many ugly conservative think tanks and right wing blogs.
Anonymous

Fox commentary and the very wealthy like the Koch brothers fund think tanks that say exactly the kind of stuff you are parroting. One is not being snide to point out how nonsensical your statements are or that Palin, Limbaugh, Beck, Hannity et al. do consistantly promote the idea that this country is being ruined by the poor.
Anonymous

The left has slogans?????????? AHAHAHAH! This from someone, defined by slogan, who just strung together 7 standard but unrelated conservative slogans and tried to pass them off as an intelligent comment .
Anonymous

So, how rich are you and how hard do you work? LOL

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