Fewer Pay, More Receive

I received yesterday a certified letter from the IRS informing me that I need to send money to the Treasury for the third time in three months. On the one hand, I’m fortunate to make enough money to need to pay so much so often. On the other hand, I have to wonder what I’m getting in return for such a privilege. More bombs and bailouts? I wish it weren’t so, but history suggests that that’s precisely what my taxes will buy.

And I do mean my taxes. Not mine as in just mine, but mine mixed with taxes paid by fewer other citizens. Corporations have whittled their share of the federal income responsibility to just 12%. Now I find, courtesy of longtime reader Richard and material he found from the Gartman Letter, that the percentage of US households paying tax is on the decline. Witness the following excerpt from Gartman:

While on the topic of taxes this morning, we thought the following information gathered by the Tax Policy Center was hugely important as nearly half of the US households paid no federal income tax last year because their incomes were too low or because they qualified for enough income tax credits, income tax deductions and/or income tax exemptions to avoid any tax at all. The problem is the trend is for ever greater numbers of people to avoid income taxes and to thus have “no skin in the game” of governance:

In 2006, 37.3% of the households in the US paid no income taxes:
In 2007, 37.9% did not pay taxes;
In 2008, 48.5% did not,
and In 2009, 46.9% did not.

This is a shocking trend indeed, for it was only five years ago that nearly 2/3rds of the public paid in income taxes to Washington. Five years ago 2/3rds of Americans had “skin in the game” of government. Last year, that was down to just a very little bit more than 1/2, and if the trend has continued, when the data for 2010 is gathered we may find that we’ve crossed the 50% threshold. When the majority of the people find that they can elect representatives to government that will willingly raise the taxes on the minority, the minority… the productive citizens of the nation… are doomed; the Republic is doomed; the great experiment in free markets, property rights and sanctity of contract shall be on its way to swift and certain failure. Of all the statistics we’ve seen lately that give us reason to be disconcerted about the future this is the one. It is a trend in full; it is a trend we fear… greatly.

I fear it greatly, too, and my personal feeling shows why this trend will kill the nation if allowed to continue. Frankly, I get too little in return for the income taxes I pay, and I pay too much. Here’s what I’ve had to pay on my own on top of what I’ve had to pay to Uncle Sam over the years:

  • Higher education costs
  • Health insurance
  • Other types of insurance, like auto and home
  • Retirement funding

When I add up all the taxes I’ve paid, they total far more than the cost of all the above services I’ve had to fund on my own. Why don’t I get any of those services provided by my taxes? Instead, here’s what I’ve received in return for the exorbitant taxes I’ve paid:

  • Wars for nothing
  • Corporate bailouts
  • Corporate welfare
  • Social spending for other people
  • An unprotected border

If my taxes go even higher to fund all of the above while I continue needing to pay the higher education, insurance, and retirement costs for my family, why in hell would I want to work harder? Suddenly, ambition becomes idiocy. What was once considered a successful man turns into a sucker who foots the bill for all the deadbeats who don’t pay a dime into the system.

About the only good things I get in return for my taxes are roads and 911 services. Even the roads, though, I fund mostly via gasoline taxes. As a foreigner living in Japan, I’m better taken care of by that government than I am by my own. I don’t actually want government care, but if I have to choose between getting nothing in return for the taxes I pay and getting some useful services, I’ll take the services.

Now, here’s the really scary part. To be one of the “rich” who pay most of America’s taxes, your household needs to earn just $60,000 per year. Two people making $20 per hour and working 40-hour weeks will get there. We’re not talking about doctors, lawyers, and hedge fund managers. We’re talking about plumbers, electricians, and restaurant managers. If that group of mainstream Americans are footing the nation’s welfare spending, and the ranks of deadbeats are growing, we’re on course for catastrophe.

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  1. Christopher burns
    Posted July 28, 2010 at 4:09 am | Permalink

    What all of you are glossing over is that these numbers are only reflective of federal income tax, which accounts for net even a plurality of taxes paid in this country, much less a majority. Federal revenue from the FICA tax is just about equal to income taxes, and it is largely paid by the bottom 75% of earners. I make just under 100k and yet Warren buffet pays the same as me ( or less if all his income is investment income). Additionally, state and local taxes are largely regressive and substantial, enough so that they almost entirely cancel out any progressively that remains in the federal income tax after almost three decades of income tax cuts and FICA/sales tax increases.

    To claim that half of households pay no taxes is borderline lying.

  2. Charlie Redmond
    Posted July 20, 2010 at 2:58 am | Permalink
  3. Daniel
    Posted July 17, 2010 at 3:53 am | Permalink

    Yes, what bothers me about the VAT is that our government is now considering it in addition to the existing income tax. That’s the last thing we need, but apparently our “representatives” can only think of new taxes as an addition to what’s already there, and not a replacement.

  4. Richard
    Posted July 16, 2010 at 10:15 pm | Permalink

    Adopt a value-added tax if you want everyone to pay a share of the tax burden. The truly poor and destitute might be given something similar to a rebate.

  5. Stephen Kreyling
    Posted July 16, 2010 at 8:08 pm | Permalink

    If you didn’t see it already, you may be interested in the notes that in 1997 the top 50% income level taxpayers, those making more than $32,879 AGI payed 97.11% of the taxes. See http://profutures.com/article.php/691/

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