I procrastinate on a whole host of things, some even marginally important in my little world. But filing my taxes isn’t one of them. I get all the info to my tax guy as soon as I can. Then I hold my breath until I see how badly I’m going to get screwed. It’s a spring ritual — much like watching the politicians and other miscreants fire the first ball into the dirt in front of home plate at the baseball home openers.
So if you have waited until today — and hey, you got an extension this year because those Inside the Beltway celebrated Emancipation Day as a no-work holiday on Friday — the question is this: Did you pay any federal tax?
Note: If you are getting a refund but still paid tax, well, you still paid tax. You just gave Uncle Sam an interest-free loan for several months. I digress.
Anyway, not all that many pay federal income taxes. According to a story on The Huffington Post — which I believe is either from the Associated Press in total or in large parts — some 45 percent of American households pay no federal tax. And at the same time, the top tax rate paid by the big dogs at the top of the income totem pole is declining.
Here’s from the story, “America’s Richest Taxpayers See Federal Taxes Dramatically Drop“:
As millions of procrastinators scramble to meet Monday’s tax filing deadline, ponder this: The super rich pay a lot less taxes than they did a couple of decades ago, and nearly half of U.S. households pay no income taxes at all.
The Internal Revenue Service tracks the tax returns with the 400 highest adjusted gross incomes each year. The average income on those returns in 2007, the latest year for IRS data, was nearly $345 million. Their average federal income tax rate was 17 percent, down from 26 percent in 1992.
Over the same period, the average federal income tax rate for all taxpayers declined to 9.3 percent from 9.9 percent.
The top income tax rate is 35 percent, so how can people who make so much pay so little in taxes? The nation’s tax laws are packed with breaks for people at every income level. There are breaks for having children, paying a mortgage, going to college, and even for paying other taxes. Plus, the top rate on capital gains is only 15 percent.
There are so many breaks that 45 percent of U.S. households will pay no federal income tax for 2010, according to estimates by the Tax Policy Center, a Washington think tank.
“It’s the fact that we are using the tax code both to collect revenue, which is its primary purpose, and to deliver these spending benefits that we run into the situation where so many people are paying no taxes,” said Roberton Williams, a senior fellow at the center, which generated the estimate of people who pay no income taxes.
OK. Let’s see. Nearly half of all households pay no federal tax (although I expect many pay state, local, Social Security, Medicare and who knows what else) — but fully 100 percent receive some kind of government service, if only in the form of national security.
And Prez O says that to reduce the federal deficit we will have to slice spending while increasing taxes on the rich. (Another note: It will be interesting to see what the Inside the Beltway crowd considers to be rich these days.) But the Republicans — and conservative Democrats — say that increased taxes are a non-starter in talks to reduce the deficit.
I wonder what the near-majority who now pay no federal tax think about all of this? And I wonder how much of this reflects the changes in our economy where many Americans now flip burgers instead of making cars, TVs, appliances, tires and things for companies that paid employees enough that they did pay taxes — gladly. And I’m not talking about the rich. I’m talking about what we used to call the middle class.