NCPA - National Center for Policy Analysis


October 8, 2009

Lately the government has been a distributor of special privileges, taking money from some and giving it to others. America is now about evenly split between those who pay income taxes and those who consume them, says John Stossel, a co-anchor of ABC News' "20/20."

The Urban-Brookings Tax Policy Center recently disclosed that close to half of all households will pay no income tax this year.  Some will pay less than zero -- that is, they'll get money from those of us who do pay taxes, explains Stossel:

  • The Tax Policy Center adds that this year the average income-tax rate for the bottom 40 percent of earners will be negative and that their cash subsidy will equal 10 percent of the total amount the income tax brings in, thanks to the Earned Income Tax Credit and President Obama's "Making Work Pay" program.
  • The view from the top also shows the lopsidedness of the tax system; the top 20 percent of earners makes about 53 percent of the income in America but pays 91 percent of the income tax.
  • The top 1 percent pays 36 percent. The IRS says the bottom half of earners pays less than 3 percent.

This presents a serious problem because government has such vast powers to dispense favors, says Stossel, because people who pay no tax will not hesitate to vote for politicians who promise big spending.  Why not?  They will get stuff without having to pay for it.

Yes, working people who pay no income tax still pay taxes: sales tax and payroll (Social Security and Medicare) taxes.  But the income tax is big and visible, so it's a problem that a growing number of people don't pay, but get benefits from those who do, says Stossel.

Source: John Stossel , "Transfer Machine," Jewish World Review, October 7, 2009.

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