About Those 47 Percent Who Pay “No Taxes

[EJSTES2005]

Great article.

http://taxvox.taxpolicycenter.org/blog/_archives/2010/4/15/4506088.html

....

"So who are these folks who pay no federal income taxes? Mostly, they are people who don’t make very much money. Many are elderly: Think a widow living only on Social Security benefits. Others are parents earning less than $20,000. Only about 5 percent are non-elderly households making more than $20,000".
....

"There is, however, another reason why some people don’t pay. For decades, both Democratic and Republican governments have made conscious policy decisions to remove low-income working families from the income tax rolls. And, guess what, sometimes government policy works exactly as intended. That’s what happened this time."

"Let’s take one of the biggest drivers: the Earned Income Tax Credit. Based on an idea (the negative income tax) originated by conservative icon Milton Friedman, the EITC is refundable, so that people who work for low wages can not only wipe out their income tax liability, they can even get a cash payment from the government. The EITC was enacted in 1975 under President Ford, greatly expanded in 1986 under President Reagan, and expanded again under presidents Clinton and Bush (both of them). It's been the very model of bipartisan tax policy (which, I suppose, is why some dislike it so)."

"Both the EITC and the child care credit are explicitly designed to encourage people to work—a goal most of us (including Friedman and Ronald Reagan) thought was a very good thing. "

"Let me close with two questions: Do those who reflexively oppose all tax hikes now favor raising taxes on elderly widows and low-income working families? And what would these critics of small government suggest we do with the revenue windfall this tax hike on the poor would generate? Help finance a cut in the estate tax, perhaps? "

"So, as you file your last-minute returns on Tax Day, keep in mind what really is going on with the now-famous 47 percent. It may not be quite what you think."

[Catshrink]

1. Neither does GE or Exxon Mobil

Outrageous: Exxon Mobil Paid No Income Tax in 2009

"Last week, Forbes magazine published what the top U.S. corporations paid in taxes last year. “Most egregious,” Forbes notes, is General Electric, which “generated $10.3 billion in pretax income, but ended up owing nothing to Uncle Sam. In fact, it recorded a tax benefit of $1.1 billion.” Big Oil giant Exxon Mobil, which last year reported a record $45.2 billion profit, paid the most taxes of any corporation, but none of it went to the IRS:

Exxon tries to limit the tax pain with the help of 20 wholly owned subsidiaries domiciled in the Bahamas, Bermuda and the Cayman Islands that (legally) shelter the cash flow from operations in the likes of Angola, Azerbaijan and Abu Dhabi. No wonder that of $15 billion in income taxes last year, Exxon paid none of it to Uncle Sam, and has tens of billions in earnings permanently reinvested overseas.

http://blogs.alternet.org/speakeasy/2010/04/06/outrageo ...

[Travis_0004]

6. Exon has 20 billion in tax liability on their balance sheet

GE has 2 Billion in Deffered taxes on their balance sheet. To make it sound like these companies don't pay any taxes is absurd. Maybe they didn't pay any taxes last year, but according to their own statements, they owe a combined 20 billion, so it will be paid. Accounting rules are different than financial rules, so they are using accelerated deprecation on forms for the IRS (which lets them delay taxes), yet on their balance sheet, they recognized that they owe the money, and it will be paid.

[atreides1]

8. So they owe money

And what magic fairy told you that they were going to pay it?

They may have recognized that they owe the money, but it doesn't mean squat until they actually pay what they owe.

It's sort of like saying "the check's in the mail".

[Travis_0004]

11. I would think the power of the IRS will ensure they get their money

First off, I would assume 99% of companies have deferred taxes on their balance sheets. Its because of the tax rules, which the government has setup to encourage investing. You make it sound like major companies just submit their books, and nobody questions it. I guarantee somebody at the IRS has looked at their books, and they probably agree that they lost money last year, so no taxes are owed. They may have only lost money on paper, due to accelerated deprecation, but these are rules which the government has setup. The IRS will get their money, even if they have to take it by force, but as of now I would assume that they are current on all taxes paid, so there is nothing else for the IRS to do.

[W_HAMILTON]

12. It doesn't matter if they can keep deferring them.

Case in point, Exxon has deferred taxes of $19 billion in 2005, $19 billion in 2006, $21 billion 2007, $18 billion in 2008, and $21 billion in 2009. With all those deferrals, it still didn't prevent them from having a negative domestic income tax expense this past fiscal year.

Also, GE has made almost $72 billion since 2006, while their domestic income tax expense during that same time has been a negative $781 million.

During that same time, Exxon has made $145 billion in profits, while paying $12 billion in domestic income tax, an average federal income tax rate of ~8%.

None of this takes into account that a good portion of those deferred tax liabilities may actually be payable to foreign sources, which would at worst have no effect on their federal income taxes, and at best may actually lower them due to decreased net income and/or the foreign income deduction/credit.

[hyphenate]

2. As a disabled person, I get SS-Disability.

It's already difficult enough for me to do much more than survive every month, but it can take up to 6 months for me to put aside enough to purchase anything or get a goal accomplished. It comes to about $100 per month to buy anything unplanned, and then it usually buys something I really have need for.

So, yeah, some of the money can be utilized, to a small degree. On the other hand, I want to shoot my SIL for bitching about their $2000 mortgage and how poor they are, and then go and buy something extravagant, still bitching about how poor they are.

[Mojeoux]

10. You speak for me and millions more

About $100.00 exactly.

[provis99]

3. sorry, I posted on wrong Brookings article

:blush:

[DonCoquixote]

4. quote

"Let me close with two questions: Do those who reflexively oppose all tax hikes now favor raising taxes on elderly widows and low-income working families? And what would these critics of small government suggest we do with the revenue windfall this tax hike on the poor would generate? Help finance a cut in the estate tax, perhaps? "

How much you want to bet that is EXACTLY what some will propose?

[sandnsea]

5. Except all year they take the FICA taxes

And use them interest free to pay the social security and medicare that they always say are part of the federal income tax budget whenever they report on where our tax dollars go.

[OHdem10]

7. Enron went 4 years paying no taxes.

Do they emphasize people do not make enough money to pay taxes.

This says more about the American Economic System than anything else.

This is what the wealth gap creates. A Society of Mega Riche
not so many in the middle and masses of working poor.

Economic Policies have created this situation.


Now I might add it will not be good for Democracy for this
wealth gap to continue. Tensions will rise in time when
people who are "theoretically, not paying Income Taxes
yet they can promote and vote for policies which require
tax money to pay for them. The Mega Riche will in time
have something to complain about.

Right now there are an awful lot of people paying no taxes
because they have no job.

Once theEconomy reaches some degree of normalcy, Congress
should take a look at this. What can they do to encourage
living wages and therefore have more people paying taxes.

[MajorChode]

9. Poor wage earners still pay federal taxes

FICA is deducted at 7.65% on the first dollar they make. Their employer kicks in another 7.65% for a total of 15.3%. Many wealthy people pay zero FICA, but it's not likely you'll see a news article on those numbers.