Like a bad dream, each year, the headline surfaces from various tax foundations regarding how many Americans paid no federal taxes. Last year it was 47%. This year it’s 45%. Same thing. Millions of Americans, many of them earning six figures or more, will not pay a dime into the federal tax coffers this year. Many of these are the same voices (ironically) calling for tax increases on the rich and an end to “corporate welfare”. How convenient. Here’s a nifty tax table from the Tax Policy Center showing which income groups got away without a tax bill this past year:
How Could you Possibly Pay No Taxes at $80K, $100K, $500K ???
There are numerous tax credits, deductions and other various dumb stimulus programs basically transferring wealth around which end up with various unintended consequences. You can’t blame people for rightfully claiming the credits and deductions owed to them. And while some call for a complete repeal of ALL credits and deductions, that’s a tough pill to swallow also. It would be like changing the rules mid-game, right? You go and buy some pricey real estate assuming you’ll get to deduct the mortgage interest and a year later, that deduction is gone? Not only would this likely result in further declines for the housing market in general (it certainly couldn’t be viewed as a positive!), but changing the rules after the fact is just plain wrong.
I don’t know what the solution is. Perhaps to project some serious changes somewhere down the road to give people time to prepare and react. Perhaps some credits and deductions remain in place while many go. Or perhaps even, there’s a mandate that ALL Americans must pay at least a marginal amount of money into the system each year. But that even becomes increasingly complex. After all, if you only had $100 in taxes due all other things being equal, and you took a capital loss of $3,000, shouldn’t you be able to write that off? And invariably, for whatever tax change is eventually enacted, there will be numerous loopholes, special interests and ways around it. My thinking is we need to at least shift some of the burden, even if it’s more symbolic than impactful, onto all American families as opposed to freeloading on the wealthy while continuously calling for further increases on the wealthy – when we’re ALL responsible for the fiscal mess we’re in. We democratically elected the morons in Congress, not just the rich.
How Would You Change Tax Law Today?