AP Tax Outrage!

How often do you see articles from the Associated Press which talk about tax inequalities from the ‘other’ direction… namely the number of people who don’t pay any income taxes.  In fact, you may be surprised to find out that nearly half of American households don’t have to pay a single cent in Federal Income taxes.  A full 47% of households will pay no 2009 income tax.

Tax-Free 50k

The article mentions that a family with two children below 17 years old that makes $50,000 will pay no money in tax (this from a study by Deloitte).  How do you get there?

$50,000 in salary – $11,400 Join Filing Standard Deduction – 4 x $3650 in Personal Exemptions = $24,000 in salary.

Tax owed: $2,769 – 2 x $1,000 in tax credits for children under 17 – $800 from the Making Work Pay tax credit.

-$31 owed… the family made $31 from the tax code.

Scary Stuff

The next time you see some rhetoric about the rich getting off too easily from the current tax code, consider this… cutting everyone a break when many people don’t pay taxes isn’t a break at all, in absolute terms.  If you pay $0 in taxes, you’ll still pay $0 in taxes (saving $0).  If you pay $50, you’ll pay $25 (saving $25).  And if someone pays $50,000, don’t be mad when they suddenly pay $25,000 (saving $25,000).

So, reader, ask yourself at which point the tax code becomes to fair… to the people stuck paying the bill.  Let me know what you think!

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