But the real problem is spending and deficits, not tax revenue. These people have no restraint or shame. They will spend as much as they think they think they can get away with and to hell with the consequences, Republican and Democrat alike. Until an enforceable statutory or constitutional limit is placed on spending the gap between government spending and income will never be closed. The politicians only get more brazen over time.

“There are a mish-mosh of reasons that have gotten us to this point but chief among them: Congress and the President use the Tax Code as the architect for most of their social welfare programs.”

At the end you ask “who should pay taxes?”

I’ll answer, everyone should.

I would love to see if you have data on how a flat tax works in certain places like Hong Kong. Is it more efficient and effective? From what I hear yes.

People would spent less time maximizing tax returns and more time outputting value into society. Less work would be spent on figuring out tax loopholes and more time on generating revenue.

Of course these are my own personal opinions and I know not everything is rosey with a flat tax.

It’s just not fun to be part of the two-thirds supporting the one-third not paying taxes. I have to pay taxes because I make above average? Just because they didn’t make the decision to earn more and to go for tax breaks?

I’m fine with paying taxes, just not when people “purposely” don’t go out to make more money or provide more value because of the many welfare programs.

This comes from running a business in California (something I’ll never do again). Too many handouts and too tough on business pushes business out and makes it less effective. This includes taxes and other ways of generating revenue.

Thanks for all your tax writing Kelly, it is very enlightening.

Good points.

It is anti-democratic to have only a small segment of the population participate in the funding of the government. So, to answer your question, I think everyone should pay taxes.

To get there, the first thing we should do is eliminate all refundable tax credits. They are thinly disguised welfare payments and invite the same types of fraud the old welfare system used to invite.

Who should pay taxes? I think all but the most radical would says that everybody should play taxes both for fairness and for stakeholder reasons. Which, of course, is not the same thing as saying everybody should pay federal income taxes. Those zero-payers are paying sales, property, FICA, and Medicare to name a few of the taxes they pay so I suspect they all feel pretty connected to the cost of government. Collecting more income taxes from people that make more than 50K in AGI in the form of Federal income tax isn’t going to change much.

The increase in percentage of non-payers from 28% in 1950 to 32% in 2007 (I’ll talk about 2008 in a minute) doesn’t seem like that big a deal to me. It also would appear that the number of returns getting filed is increasing faster than the working population in recent years and my guess is that many of the new filers are people that were too poor to bother to file in the past and only file now because of EITC and stimulus payments. These people should actually feel more connected to the government today than in the past.

Personally I think that we should gradually phase-out (say 5% per year for the next 20 years) the huge tax breaks created by deductions for mortgage interest, employer-paid health care premiums, state and local taxes, and charitable contributions (much of which enriches all ready wealthy foundations, universities, and hospitals).

As for 2008, I’ll make two points. First, we decided to deliver stimulus through the tax return rather than just cutting checks so it’s misleading to say that this was relevant to studying the the non-payer percentage. If the government had just sent a check for $800 to everybody that filed a tax return in 2007 and ignored 2008 returns, non-payers might still have been at earlier levels.

Second, you might want to take a closer look at the Tax Foundation numbers. It’s not clear to me how they calculate the % of non-payers and the 2008 raw numbers look a little odd. For example, 47M returns were filed for less than 50K with an aggregate tax liability of $86B. The Tax Foundation says that there were 52M non-payers which means a surprisingly high number of zero-payers made more than 50K, a small percentage of <50K filers owned surprisingly large amounts of taxes, or there's something hinky in the calculation. Also, the preliminary # of filers for 2008 used by the Tax Foundation was 142M but the actual number was 155M. That's a huge difference. I'm NOT saying they fiddled the numbers but there's clearly something that needs further investigation before accepting the the Tax Foundation estimates for 2008 as accurate.

http://www.taxfoundation.org/publications/show/25962.html
http://www.irs.gov/pub/irs-soi/08in01pl.xls
http://www.irs.gov/newsroom/article/0,,id=188359,00.html