45% of Americans (rightfully) pay $0 in income tax | Hacker News Reader

45% of Americans (rightfully) pay $0 in income tax

money.cnn.com

14 pointsbconway9 comments

Rightfully? Want a reason why this country is run the way it is? This kind of tax policy is a huge reason. We have a huge swath of people who are shielded from the effects of poor spending and governance. In fact, they get the benefit without any of the cost. It creates a horrible third payer situation. Two groups (in this case non-taxpayers and big government politicians/lobbyists) collude to take money from another group (taxpayers) to mutually benefit themselves. Non-taxpayers get all the government benefits they want and politicians/lobbyists get a reliable bloc of voters for their favored policies. This nation will only survive if every last one of us has skin in the game, including and especially our personal wealth. Why do we like to see financial advisers disclose their personal investments before taking their advice? It's because people have a much easier time throwing other people's money away.

I think this is misleading. What the article describes is that 45% of Americans don't have to write Uncle Sam a check come April 15th, and may expect a check from Uncle Sam, due to tax withholding by their employers.

What I want to know is the percentage of Americans that receive a check from Uncle Sam that exceeds their tax liability.

That's not correct. The article is indeed saying that 45% of Americans do not pay federal income taxes, or actually make money from filing taxes.

There is no situation where you can make money from the tax system. At most you can only enjoy cashing in on tax losses against current tax liability.

Getting a refund from your filing just means that you overpaid during the course of the year, hence the term 'refund'.

Sorry, that's wrong. Because of tax credits, many people make money from the US tax system. Here, read more: http://finance.yahoo.com/taxes/article/110492/millions-of-am...

> 15 million American households ... receive more cash from the IRS than they contribute in federal income taxes and employment taxes.

I stand corrected. Man that is kind of messed up.

Even if you support that net activity, which is essentially a public welfare, it doesn't belong in the tax code.

I wonder if we'll ever see the day when all of this taxation complexity is unwound and you can actually cleanly see how policy changes affect everyone.

Yeah -- it is. Like you say, many of the programs are well-meaning (education, help for the poor, green energy) -- but would be much better served through simple grants rather than tax credits.

Agreed. He uses some funny wording, and separates the content, so you won't notice.

"For tax year 2010, roughly 45% of households, or about 69 million, will end up owing nothing in federal income tax,"

"More than two-thirds -- or 49 million of the 69 million households -- pay payroll tax. Of those, 34 million end up paying more in payroll taxes than they get back on their federal return. The other 15 million pay payroll tax but they get enough refundable credits to offset what they paid."

In short, 34 million of the 69 million pay more in taxes than they get back on their federal tax return. They don't -owe- anything because they pre-paid it.

So now we're down to roughly 25% of households not paying income tax because they don't earn enough or have other tax breaks. It still seems like a lot, but there's a lot of poverty out there, so it doesn't really surprise me.

No, you're confusing the difference between payroll tax and income tax. Payroll tax (as he is using it in the article) is not the amount of federal income tax you pay from your paycheck, but Social Security and Medicare. It's written confusingly -- but you can search around and find better write-ups, like in the New York Times, if you'd like to know more.

Reply on news.ycombinator.com