Sometimes Ann Coulter is an idiot, for instance when dissing federal encouragement of having children

You'd think someone who wants America for Americans would want to encourage anything which promotes Americans having more children instead of importing them, but you would be wrong.

Rubio's insistence on a larger child tax credit stops some of the damage being done by Republicans to people with families larger than four.

Abolishing the personal exemption meant parents lost those exemptions for all their children, and the increased standard deduction didn't go far enough to replace them, meaning they'd pay more in taxes just because they have more kids.

Coulter's indignation appears to be purely personal, an ugly intrusion of the irrational into her otherwise often rational positions.

She doesn't realize how libertarian she sounds (she hates them by the way). Americans who have children are making it possible that something like America survives into the future, which is a more sure and lasting contribution than any law which might be passed.

Some of the founders recognized that laws are a mere parchment barrier. When the pirates are attacking, you need a navy, which means sailors, not a bill of rights.

Your mortgage interest deduction is only eighth in the latest list of top things on which government claims it loses revenue

But libertarians especially hate it. Expect more articles telling you it's got to go as tax reform talk heats up in Congress.

Here are the top 20 "tax loss expenditures" for 2016-2020:

1.  Exclusion of employer contributions for health care and insurance: $863 billion

2.  Lower tax rates on dividends and long term capital gains: $678 billion

3.  Income made by controlled foreign corporations: $587 billion

4.  Contributions made to IRAs and 401k plans: $584 billion

5.  Pension plan contributions: $424 billion

6.  Earned Income Tax Credit: $373 billion

7.  Deductions taken for state and local income taxes, sales taxes, property taxes: $369 billion

8.  Deductions taken for mortgage interest on owner occupied homes: $357 billion

9.  Obamacare "subsidies": $327 billion (what a laugh: they raise the cost, give you a subsidy, and count the subsidy as a tax-free gift)

10. Child tax credit: $271 billion

11. Expensing depreciable business property: $248 billion

12. Deductions taken for charitable contributions: $231 billion

13. Social Security benefits: $214 billion

14. Municipal bond income: $195 billion

15. Deductions taken for taxes on real property: $180 billion

16. Capital gains taxes excluded at death: $179 billion

17. Medical expenses and over the counter medications under cafeteria plans: $169 billion

18. Capital gains taxes excluded on sale of principal residence: $166 billion

19. Life insurance proceeds: $128 billion

20. Deduction for income from domestic production activities: $102 billion.

Total revenue the government claims it's "losing" because of its "benevolent" tax policy on these items: $6.645 trillion over five years, or $1.329 trillion annually.

My, how nice of them. 

Trump's tax plan released to the public today is ambitious and pro-growth

The Trump tax plan can be reviewed here.

Notable features include exemption from federal income taxation entirely for up to about 73 million households who make up to either $25,000 individually or $50,000 jointly.

This is in the spirit of the original income tax law, which for its first few years, that is until the demands of World War I and the bureaucratic state came into play, taxed the incomes of no one except the very wealthiest.

It is unclear whether the plan retains the child tax credit or the earned income tax credit, two programs which effectively transfer welfare to lower income families who pay no income tax anyway and who receive through these two vehicles what is effectively a rebate of Social Security taxes they pay as employees, eliminating its regressivity.

For the rest there are just three tax brackets of 10%, 20% and 25%, kicking in at joint incomes up to $100K, up to $300K and beyond $300K. Presumably, but not stated, short term capital gains are taxed at these ordinary rates. Long term capital gains tax rates are 0% up to $100K of joint income, then 15% and 20% up to $300K and beyond $300K of joint income.

Business taxes are slashed to 15% no matter the size, which is YUGE for American competitiveness.

The AMT is eliminated entirely, along with the marriage penalty and . . . the death tax. It's going to be unbelievable!

Deductions are capped for the richest Americans, but deductions for charity and mortgage interest are retained.

We'll see what the dynamic scorers will have to say about it for revenues, as time goes by.

Conservatives give thanks for the achievements of John Boehner, libertarians, the ignorant and the stupid just snarl

• Saved taxpayers $762 billion over ten years by making the Bush tax rates permanent for 98% of all filers beginning at the dawn of 2013
• Saved taxpayers $1.8 trillion over ten years by finally fixing the Alternative Minimum Tax for all victims of bracket-creep
• Saved taxpayers $339 billion over ten years by maintaining the 15% capital gains tax rate for incomes below $450,000
• Saved families $354 billion over ten years by maintaining the child tax credit
• Cut average annual federal deficits of $1.3 trillion 2009-2012 by 57%, to $556 billion on average 2013-2016 by ending the emergency Social Security Tax reductions and instituting the sequester spending cuts
• The S&P 500 immediately responded with total returns in 2013 of 32.39%, the fifth best year since 1970  
• The moribund US Dollar rose 19%, from below 80 to 95 today as overall fiscal rectitude improved
• Causing oil prices to plummet from an average of $95/barrel 2011-2014 to $52/barrel on average in 2015 
• Causing average US gasoline prices to fall from $3.34/gallon one year ago to $2.28/gallon today
• Helping to keep the all-items consumer price index year-over-year nearly flat, rising just 0.2%

Let's Face It, Republicans Helped Create "The Takers"

It's time for a reality check. Republicans bear heavy responsibility for creating "the takers", the infamous 47% of households who pay no taxes.

The real reason Mitt Romney lost the election is because he couldn't get Reagan Democrats to turn out for him enthusiastically, people for whom dissing the whole idea behind the tax credit programs expanded by Reagan and Bush 43 to subsidize working families just like them sounded foreign coming from the mouth of a Republican candidate for president. I refer to the Earned Income Tax Credit and the Child Tax Credit.

Reagan had made the former his answer to welfare dependency, and George W. Bush further expanded it and also doubled the latter, to the point that now, as the Tax Policy Center says here:

[T]he Earned Income Tax Credit and the Child Tax Credit . . . are the major reason many low-income working families avoid the income tax. About one-third of those who don’t pay are families with kids.

This New York Times graphic, using Tax Foundation data, shows how the percentage of non-taxpaying filers had grown by over 50% since 1986 through the end of the Bush presidency, and now under Obama has really ramped up another 50% so that since the time of the 1986 tax reform twice as many filers have no federal tax liability as did twenty-five years ago. If Obama has doubled down on anything, they were Republican ideas to begin with. To paraphrase an old saw, We sold them the rope they're hanging us with. 

What once seemed like benign Reagan era social props have grown into major federal welfare transfer payment programs for the lower and middle classes in America, which is why liberals like Tim Noah here deliberately don't focus on them in analyzing the takers, "the 47%". To do so mutes their point that these people still pay the regressive payroll tax, which the EITC offsets. But practiced long enough, these lower wage workers getting EITC payments every year until retirement will collect Social Security without having really contributed to it themselves, transforming it, for them, from a contribution based pension into pure welfare.

Democrats are more than happy to have Republicans do this dirty work for them in expanding the federal welfare state instead of just acting as they do in more somnolent times as mere tax collectors for it. During the next five years, these direct subsidies to families are projected to cost the Treasury over $90 billion each year. In 2011 alone there were over 26 million EITC claims costing the taxpayers nearly $59 billion. 

This issue goes to the heart of Mitt Romney's problem with the Republican Party: He had the temerity to point out the dependency practiced by too many Republicans. Unfortunately for Mitt Romney and the country, he had no constituency for this message, or at least not enough of one to get him over the top.

More than ever I suspect that this way of thinking is what was behind Mitt Romney's interest in "rectitude" in "equalizing" taxes when he was governor of Massachusetts, but also accounts for his statements distancing himself from the Reagan record in the 1990s when he ran against Sen. Ted Kennedy, just when Rep. Newt Gingrich was about to unleash The Contract With America. Reagan might have been an anti-communist conservative, but a fiscal conservative he was not, at least not in practice. That's what was really important to Romney at the time and obviously still animates him. But not his party which has made zero progress toward fiscal conservatism and has gone the other way.

Say what you will about Romney's social liberalism, it was his fiscal conservatism which alienated him not just from Democrats, but also from anyone receiving a big tax refund every spring.

A famous Democrat once said, "I didn't leave the Democrat Party, the Democrat Party left me." But a fiscal conservative can't say the same of the Republican Party . . . in living memory it's never been there.

(graphic here)

Top Tax Loss Expenditures Projected For 2011-2015

From the Joint Committee on Taxation's January 2012 projection, here are the top individual categories of lost tax revenue, commonly referred to as tax loss expenditures (the revenue value of tax deductions, tax exclusions, and tax credits), for the five year period from 2011, annualized:

1. Healthcare, healthcare insurance, long term care insurance = $ 145 billion

2. Mortgage interest = $ 93 billion

3. Dividends, long term capital gains = $ 91 billion

4. 401k plans = $ 75 billion

5. Earned income credit = $ 59 billion

6. Pension plans = $ 53 billion

7. State, local income, sales, personal property taxes = $ 46 billion

7. Capital gains at death = $ 46 billion

8. Cafeteria plan benefits = $ 40 billion

9. Untaxed Social Security and Railroad Retirement = $ 38 billion

10. Charitable giving = $ 37 billion

11. State and local government bonds = $ 36 billion

12. Medicare Part A = $ 35 billion

13. Child tax credit = $ 34 billion

14. Life insurance and annuities = $ 30 billion

15. Medicare Part B = $ 27 billion

16. Capital gains on sale of primary residence = $ 25 billion

17. Property taxes on real property = $ 23 billion

Red = housing related ($ 118 billion)

Green = health related ($ 247 billion)

Blue = investment related ($ 137 billion)

Yellow = retirement related ($ 196 billion)

Purple = social welfare related ($ 130 billion)

Black = state and local government related ($ 105 billion)                                    

Romney Is Half Right: One Tax Proposal Is New, And Alarming

And it is amazing no one has taken this seriously:

"My plan is not like anything that's been tried before. My plan is to bring down rates, but also bring down deductions and exemptions and credits at the same time so the revenue stays in, but that we bring down rates to get more people working."

Romney is threatening to reduce the value of exemptions and credits which exist under the existing tax code.

This amounts to major fiddling which the preoccupation with "deductions" obscures.

Deductions we have lost before, as in the 1986 tax reform. That he wants to reduce the value of more deductions is bad enough. But the truly alarming thing is the proposal to do the same to exemptions, and to a lesser extent to credits. That is new, and alarming.

That can only mean the whole set of assumptions involving the system of personal exemptions, and perhaps also the time-honored "married filing jointly" status itself, and credits such as the Earned Income Credit and the Child Tax Credit and the like. I can well imagine a President Mitt Romney eliminating the favoritism of the tax code toward married people, and toward their housing and their children, to make gay and unmarried people equal to them in the tax code. Remember, in Massachusetts Gov. Romney had a reputation, deserved, for being a tax equalizer.

I also expect he will propose capping the value of deductions and credits by using something like Martin Feldstein's plan, in order to preserve the deductions and credits for lower income individuals but phasing them out as one climbs the income ladder. In other words, the progressive tax code stays, but progressivity of tax deductibility goes out the window. That may be fair to a liberal like Romney, but it isn't maintaining progressivity, it is steepening it.

Mitt Romney is not a social conservative. And if he gets his way with the tax code, I suspect he's going to prove it, unless conservatives in the US House stop him.

Good luck, America. You're going to need it.

When The Weekly Standard Says Romney's Not Conservative, You Know He Is

It's the right's "pot calling the kettle black moment" of the campaign:

Plenty of conservatives are pushing back against the worldview espoused by Mitt Romney in his "arrogant and stupid' [sic] remarks at a private fundraiser earlier this year.

When representatives of National Review, The Daily Caller, The American Spectator and The Weekly Standard agree that Romney has sinned, you know he's finally done something right.

Rush Limbaugh and Red State counsel Romney to pile it on because they know that most Americans agree with Romney that handouts through the tax code are wrong, even if they don't quite understand the arithmetic.

But the aforementioned conservative establishment fuddy-duddies rebuke him, here, where you will find not a single mention of the specific handouts which Republicans have used as a form of welfare for the lower tax bracket filers, namely the Earned Income Tax Credit and the Child Tax Credit of the tax code. Taxpayers use those credits, which are refundable, to offset any income tax they may owe and receive any remaining balance in the form of tax refunds. Usually those "refunds" are substantial balances due because they file under the 10 and 15 percent tax brackets where they pay little tax relative to higher earners in the first place, amounting to hundreds and even thousands of dollars in tax "refunds" which are no refunds at all, just handouts. This is the slimy work of liberalism on display, capturing a definition and gutting it, demonstrating for all to see that the so-called conservatives of the Republican Party are no conservatives at all because they participate in the ruse.

When just 17 percent of the American people still use paper and pencil to figure their taxes, it is not surprising how little understanding there is on this issue. Most people hire a tax-preparer or use something like TurboTax, and consequently have no mathematical understanding for the reason they are getting so much money back. But if so-called conservatives really were conservative, they would be explaining this to you, and not little ole obscure me.

Gov. Mitt Romney Is Exposing The Liberalism Of Presidents Reagan And Bush

Gov. Mitt Romney is forcing us to consider seriously how Ronald Reagan and George W. Bush got carried away by liberal impulses and got us into troubles.

I think Romney was not a fan of Ronald Reagan in the 1990s because he realized Reagan's program was fiscally irresponsible, cutting taxes while increasing military spending to defeat Soviet Communism. The result was the largest increase in the US public debt since WWII. As a business man who can read a spread sheet, Mitt Romney can recognize fiscal insanity when he sees it.

Now a leaked video of a private fundraiser Romney addressed in Florida in May is being attacked by the left in recent hours. It shows Mitt Romney not too happy with the liberal consensus which uses the tax code as a form of welfare, primarily through the mechanism of tax credits combined with statutory tax rates which nullify income tax liability. This was not a bug in the law. It was a feature intended all along. Romney is signaling that he's not entirely on board with this form of liberalism.

The idea of getting people off welfare was an ingenious one under Reagan, effectively rebating their Social Security contributions when they went to work, instead of collecting a check directly from the federal government while unemployed. But it was fundamentally a compromise with liberalism, and the Earned Income Tax Credit later took on a life of its own, being notably expanded under Bill Clinton and under George W. Bush. Combined with the Child Tax Credit, the two credits represent transfer payments far in excess of the cost of the mortgage interest deduction, the drumbeat against which gets louder by the day. To take away the mortgage interest deduction would yield the government about $80 billion a year in new revenue. But eliminating the two tax credits would end a direct federal government expenditure in excess of $110 billion a year.

If you want to know in what world liberals like Nancy Pelosi under a liberal president like Barack Obama would find it thinkable to consent to a deliberate underfunding of Social Security, liberalism's signature program, by rolling back payroll taxes to help the working poor during the Great Recession, look to Ronald Reagan, who did basically the same thing for poor people through the EITC way back in the 1980s. In making Social Security contributions rebateable to the working poor, Reagan was nothing if not a liberal trendsetter.

Another innovation and accommodation with liberalism by Ronald Reagan was EMTALA, part of the tax reform of 1986, which made it the law that emergency rooms had to provide services regardless of ability to pay. That unfunded mandate costs approximately only $50 billion a year today. I say "only" because lying about the severity of that problem became the heart of the healthcare debate which gave us ObamaCare. The Heritage Foundation may have authored the idea of the individual healthcare mandate in 1989, but once again it was Ronald Reagan who paved the way and provided the cover for accommodating what eventually became ObamaCare's liberal tyranny.

Romney's remarks also question George Bush's two-state solution to peace in Israel, which is nothing but another unrealistic aspiration of liberalism which thinks you can put a chicken and a hungry snake in the same pen and enjoy a quiet Sunday afternoon. To this Romney wisely prefers the unsteady truce of the status quo. In doing so his realism is shining through.

Mitt Romney's looking better all the time, and conservatives should reconsider whether voting for him is such a bad idea after all. 

Sean Hannity's Libertarianism Is Stupid

The radio ad for Sean Hannity's program runs incessantly, featuring him saying, "Society doesn't need to put its seal of approval on the choices people make."

This in reference to same sex marriage.

He obviously doesn't appreciate how the government already puts its seal of approval on people's choices, and has done so for a very long time.

The most obvious social example is marriage itself, which receives a healthy tax preference in the form of the tax code's filing status "married filing jointly" . . . since the end of the Second World War! This isn't just a seal of approval. It's actually a financial encouragement to marry.

Or consider the child tax credit, which you aren't going to get without having children. With it, the government encourages the having of children.

Or the earned income credit, which you don't get unless you have some earned income. It's government's way of encouraging people who don't work at all to get a job and get work experience, on the assumption that they will move up the ladder eventually to positions which pay too much to receive the credit.

All of these things the government encourages to promote social stability in the form of nuclear families, home ownership, work, and population growth, all of which are essential to . . . tax revenue.

Giving same sex partners the same rewards as heterosexual unions ignores the fact that the former are naturally incapable of growing the population. Government has no interest in promoting the ineffectual.

"Be it then, as Sir Robert says, that anciently it was usual for men to sell and castrate their children, Observations, 155. Let it be, that they exposed them; add to it, if you please, for this is still greater power, that they begat them for their tables, to fat and eat them: if this proves a right to do so, we may, by the same argument, justify adultery, incest and sodomy, for there are examples of these too, both ancient and modern; sins, which I suppose have their principal aggravation from this, that they cross the main intention of nature, which willeth the increase of mankind, and the continuation of the species in the highest perfection, and the distinction of families, with the security of the marriage bed, as necessary thereunto."

-- John Locke

The Atlantic's Lies About Tax Loss Expenditures

The latest lazy lies attacking the so-called privileges of the so-called middle class come from one Linda Killian at The Atlantic here:

"The three largest expenditures in the tax code are all things many middle-class Americans take advantage of -- tax-free employer-provided health insurance, the home mortgage interest deduction and tax-free 401(k) retirement accounts. ... The tax exemptions for home mortgage interest cost the government more than the entire budget of the Department of Housing and Urban Development according to Steuerle [an Urban Institute economist]."

These are NOT the three largest. They rank 1, 3 and 6, not 1, 2 and 3.

If Linda Killian had bothered to read the Joint Committee on Taxation's latest report on the subject, she would have known that.

Here are the top ten tax loss expenditures for 2011, according to this committee of the US Congress:

$109.3 billion  Employer provided health insurance and related

$ 90.5 billion  Reduced tax rates on dividends and capital gains

$ 77.6 billion  Owner-occupied mortgage interest deduction

$ 59.5 billion  Earned income credit

$ 56.4 billion  Credit for children under 17 aka Child Tax Credit

$ 48.4 billion  401K-type plans

$ 42.7 billion  Pension plans aka union retirement plans

$ 42.4 billion  State/local income, sales and property tax deduct.

$ 38.0 billion  Exclusion of capital gains at death

$ 31.0 billion  Exclusion of benefits under cafeteria plans

$ 31.0 billion  Exclusion of untaxed Social Security and RR benes.

Who benefits from the top three? It's hardly a middle class phenomenon . . . today.

Rich and poor and everyone in between gets health insurance when they are employed by an employer, not just the middle class. And they don't pay tax on that "income." But the size of this break is bound to decline dramatically in coming years, if ObamaCare is not struck down or repealed. Fewer employers will be providing coverage, choosing to pay lower fines instead. Other companies will deliberately downsize in order to escape the requirements under the law, making employer-provided insurance less common than it is today. The net effect may very well be that employer-provided health insurance becomes more and more an upper class phenomenon.

Reduced rates of taxation on dividends and capital gains primarily benefit the rich in America. Could that be why Killian overlooked it entirely? It certainly doesn't fit her narrative against the middle class, does it? But this category is the real number 2 in the list of tax loss expenditures.

Working class and middle class people who are lucky enough to have joined the investor class are investing primarily through tax-deferring vehicles like union pension plans and 401K plans, which rank number 7 and 6 in Congress' accounting of tax loss expenditures. It is questionable, however, for pensions and 401Ks to appear in this list of tax loss expenditures at all. Eventually the deferred money will become income, and it will be taxed.

But the more important point is that everyone in this bottom 66 percent of wage earners by definition makes less than $100,000 per year and by and large very few of them are playing around in the stock market, where fat cats like Bill Gates and Warren Buffett and Mitt Romney derive their unearned income, taxed at the non-permanent lower rates under the Bush tax legislation of 2001-2003. Were these rates permanent, however, this tax loss expenditure wouldn't even make the list.

Contrast that with something which is more or less permanent: the exclusion of income from Social Security taxation. The current income ceiling after which income is not so taxed is almost $107,000 per year. In 2010 just under $2 trillion in ordinary wages and salaries made by the rich escaped the Social Security tax. The tax loss expenditure of that? $125 billion, higher than anything in the Joint Commission's report. And it all went to the rich.

Third is the ever popular whipping boy of the tax reform crowd, the mortgage interest deduction. It should worry average Americans who struggle on the crumbs which fall from their masters' tables that our betters want to make it harder for us to own four walls and a little garden and a tree. 100 million out of 150 million wage earners in 2010 made less than $40,000 per year. Try buying a house on that.

Democrats and Republicans have successfully conspired to attack Social Security for the first time by de-funding it temporarily and haven't yet been electrocuted by the once-feared third rail of politics, so I fully expect them to keep trying on mortgage interest.

Four years ago the mortgage interest deduction was more like $88 billion, so with the collapse of housing we have witnessed a decline in the amount of mortgage interest being paid, and so deducted. $10 billion less. The reason for this is two-fold. One, fewer homeowners. Two, refinanced mortgages at lower rates. With home ownership already under severe stress, it is astonishing that liberals of both parties continue to attack it under the guise of tax fairness. What it really is, is statists greedily looking for more revenue.

I say they can all go to hell.

Michael Barone Joins The Liberal Chorus Attacking Progressive Taxation

You heard me right, the liberal chorus attacking the progressive tax code, in this case the progressive tax code's deductibility provisions which are . . . well, progressive.

Barone and other liberal Republicans like Pat Toomey, Gang of Sixers and Gang of Twelvers do it on the grounds that the deductions for mortgage interest and state and local taxes help the $100K+ set more.

Nevermind "the rich" already pay the vast majority of the taxes. They want to make them pay even more because . . . well, they don't really need the money, and government does! And maybe liberals will like us more.

Talk about ceding the moral high ground to the left. Who would want to go to all the trouble of becoming rich just so that they can have the privilege of paying even more of the taxes?

Nevermind that the poor own one of the biggest "tax loss expenditures" in the form of transfer payments for the Earned Income Credit and the Child Tax Credit: $109 billion. Compare that to the mortgage interest deduction's tax loss cost to the Treasury : $88 billion.

Here is Barone:

[T]he big money you can get from eliminating tax preferences comes from three provisions that are widely popular.

The three are the charitable deduction, the home mortgage interest deduction, and the state and local tax deduction. ...


[T]he vast bulk of the "tax expenditures" -- the money the government doesn't receive because taxpayers deduct mortgage interest payments from total income -- goes to high earners . . ..


Well why shouldn't they under a progressive tax system? 


There's really no difference between Michael Barone and Republican advocates for "tax reform" and Democrats like Peter Orszag, for example, who makes an argument for similarly flattening deductibility for the rich by limiting their traditional deductions enjoyed by everyone across the income spectrum. What this amounts to is an admission that the progressive deductibility which we have now does NOT go hand in hand with the tax code's progressive taxation.

The current arrangement may not seem fair to flat taxers, but it is internally consistent. If you pay progressively more in taxes, your deductions should justly be progressively worth more to you. And so they are. If you pay progressively less in taxes, your deductions should justly be worth less to you, progressively. And so they are.

Proposals to limit deductions for one class of taxpayers amount to destroying the internal coherence of the progressive tax code itself. It is nothing less than an attack on the idea of progressivity and its fair unfairness, all in the name of extracting even more from the pockets of successful people.

Sheer nincompoopery. 

Annual Cost to the Taxpayers of Earned Income and Child Tax Credits is $109 Billion

So admits the liberal Tax Policy Center, here:

Each year the earned income tax credit (EITC) and the child tax credit (CTC) deliver more than $109 billion of cash assistance, mostly to families with children.

There's corporate welfare, and then there's . . . well . . . welfare!

By contrast, the mortgage interest deduction costs the Feds about $88 billion in lost tax revenue annually.

And the rich don't pay Social Security taxes on any compensation beyond $107,000 in wages and salary each year. I estimate that loss to the Treasury at about $100 billion annually.

So, Solomon, which is worse?

Tax 'Em All: Let God Sort 'Em Out

People who claim, like Rush Limbaugh, that no one is undertaxed in this country don't know what they are talking about. Both the rich and the poor are undertaxed. Here is why.

For tax year 2008, IRS figures show that the top half of the country, over 69 million tax returns, contributed in excess of 97 percent of the tax revenue, $1.004 trillion. The bottom half, over 69 million returns, contributed less than 3 percent of the revenue, $27.9 billion, a staggeringly small sum by comparison.

The effective tax rate on the top half was 13.66 percent, on the bottom half just 2.6 percent.

It seems self-evident that the poorer half of the country escaped a lot of taxation, but how?

For one thing, George Bush's creation of the 10% tax bracket in 2001 reduced federal tax revenues from payers in the 10 percent bracket by $42 billion per year. For another, the Earned Income Tax Credit diverts away even more money, now approaching $50 billion per year. These credits wipe out any federal income taxes qualifying filers may owe, and actually reimburse many of them for the payroll taxes they pay, so that many actually have a negative tax rate. This is using the tax code to provide what amount to direct welfare payments, stimulus spending, whatever you want to call it. But it sure isn't "taxes."

But the poorest Americans are not the only beneficiaries.

These credits also percolate far up through the income quintiles. And none penetrate as high as the child tax credit does, relieving the middle classes of taxes to the point that many people in the middle quintile earning between $38,551 and $61,801 also pay little to no federal income tax at all. Created under Newt Gingrich and Bill Clinton and expanded under George Bush, this credit now reduces federal revenues by $143.4 billion per year. People even in the top income quintile, making in excess of $100,000 a year, can qualify for this credit, which also directly reduces their tax bill, and government revenues.

Taken together, the 10% bracket, the EITC and the Child Tax Credit help taxpayers to be sure, but at a cost of nearly $2.4 trillion over ten years to the federal government.

Compare that with the big tax break the top earners in the country enjoy because the payroll tax cap is set at $106,800. Everything they earn after that escapes the 6.2 percent tax. The annual cost of that is now $130 billion, or $1.3 trillion over a decade. The denizens of the top 25 percent of taxpayers, who earn 68 percent of the total adjusted gross income in this country, will doubtless complain that they already contribute 86 percent of the tax revenue.

But the result is that a narrower and narrower band of taxpayers in the fourth quintile (those making between $61,802 and $100,000 per year) and in the top half of the middle quintile (about $52,000 to $61,800), gets squeezed with responsibility for income and payroll taxes without enjoying the relief provided to their poorer fellows who pay very little in taxes, or their richer ones who can afford them.

A ladder needs rungs on it to get from the bottom to the top and back down again, and ours in the upper half are getting worn out.

4 of 6 Current Tax Rates Already Do Not Apply to 80% of the Country

Per the US Census, all US households divide into five groups of equal size along these income lines for 2009:

1) $0 to $20,453

2) $20,454 to $38,550

3) $38,551 to $61, 801

4) $61,802 to $100,000

5) over $100,000 (the top 5% make in excess of $180,000).

Current tax brackets are concentrated on the fifth group, the over $100,000 set, so that the top four of the six brackets affect the top 20% of earners in the population the most:

10% for adjusted gross incomes $0 to $16,750

15% on AGIs to $68,000

25% on AGIs to $137,300

28% on AGIs to $209,250

33% on AGIs to $373,650

35% on AGIs above $373,650.

The result is that 60% of the country is responsible for very little tax revenue, and the expansion of various credits like the Child Tax Credit and the Earned Income Credit have meant that an increasingly large percentage of the population is paying no tax at all.

For the 2008 tax year the Tax Foundation reported here that 36% of filers paid no tax at all:

Nonpaying status used to be a sure sign of poverty or near-poverty, but Congress and the President have changed the tax laws to pull much of the middle class into the growing pool of nonpayers. The income level at which a typical family of four will owe no income taxes has risen rapidly, now topping $51,000. 

As a result, recently released IRS data for the 2008 tax year show that a record 51.6 million filers had no income tax obligation. That means more than 36 percent of all Americans who filed a tax return for 2008 were nonpayers, raising serious doubts about the ability of the income tax system to continue funding the federal government's ballooning expenditures. 

The situation worsened dramatically in 2009, to 47%, according to the Tax Policy Center in this AP story: 

About 47 percent will pay no federal income taxes at all for 2009. Either their incomes were too low, or they qualified for enough credits, deductions and exemptions to eliminate their liability. That's according to projections by the Tax Policy Center, a Washington research organization. ...The bottom 40 percent, on average, make a profit from the federal income tax, meaning they get more money in tax credits than they would otherwise owe in taxes. For those people, the government sends them a payment.

"We have 50 percent of people who are getting something for nothing," said Curtis Dubay, senior tax policy analyst at the Heritage Foundation. ...The number of households that don't pay federal income taxes increased substantially in 2008, when the poor economy reduced incomes and Congress cut taxes in an attempt to help recovery. 

In 2007, about 38 percent of households paid no federal income tax, a figure that jumped to 49 percent in 2008, according to estimates by the Tax Policy Center. 

In other words, the tax code under George Bush and the Republicans in 2001 and 2003 became an instrument of liberal social policy, providing massive social spending on America's middle and lower classes. Combined with George Bush's massive hand out to the elderly in the form of drugs for seniors you now understand why liberals hate George Bush so much: because he out-liberaled the liberals. 

And don't expect to hear about it from Rush Limbaugh. He thinks there isn't anyone in the country who is undertaxed. 

If there were really any conservatives left in the country, they'd be calling for a complete end to these subsidies because they represent government spending which we cannot afford, and for a broader tax base which embodied every American's patriotic duty to contribute to the general welfare. 

A real conservative would equate exempting low incomes from taxation with the practice of exempting high incomes from taxation. The "refund" checks which "the poor" receive from the government when they file their taxes are no different from the exemption the rich receive when payroll taxes are not collected on income above $106,500. The former are justified as offsets of the payroll taxes the poor pay, the latter as exemptions from contributions the rich would never live to recoup. Everyone in a narrower and narrower middle pays and pays those taxes, year in and year out, to benefit the poor and the elderly. It is unsustainable.

Why Rush Limbaugh Can't Tell The Truth About Income Taxes

Rush claims no one in America is undertaxed.

He doesn't want to mention, of course, that nearly half of America doesn't pay income taxes.

And why don't they pay taxes? Because that's been the goal of Republican tax policy since the 90s:

"The dramatic increase in the number of people who owed no income taxes since the mid-90s was driven almost entirely by the creation and expansion of the per-child tax credit, a policy driven by the Right."

-- Keith Hennessey, April 15, 2010, here

The Democrats hate Republicans as much as they do because Newt Gingrich and George Bush out-liberaled the liberals. How dare they!

The Tax Elephant in the Room: The Poor Don't Pay Their Fair Share

Once again, the Republicans are about to blow it.

What's needed for the country right now, attempting to leave politics out of the discussion for a moment, is a tax system which is reasonably fair and predictable for the long haul. But what we've got, thanks to George W. Bush, is an unfair system which is deliberately gamed at the extremes, at the expense of the middle. And extending it for another two years just kicks that can of crap down the road.

Under it, nearly half of Americans, those at the low end, pay no federal income tax whatsoever, and millions of them actually get subsidies through the tax code in the form of a big fat "refund" check when they paid no taxes in the first place. These were expanded under Bush, and are defended as offsets of payroll taxes. Do the poor really need yet another offset, in the form of a temporary reduction in the payroll tax rate, especially considering that Social Security is an unfunded liability which is going broke fast?

Compared to the rates they replaced under Clinton, Bush's rates on everyone but the rich are projected to cost the treasury something like $3 trillion going forward, while only an additional $700 billion in tax loss expenditures are predicted to be forfeited from the well to do. Yet the Democrats characterize this as tax cuts for the rich. In point of fact, it's been massive tax cuts for everyone else, especially for the poorest, in the form of subsidies like the Earned Income Credit, the Child Tax Credit, and the creation of the lowest 10% bracket.

Those at the high end, people making in excess of about $106,000, get a huge payroll tax break of their own. They pay zero in payroll taxes above that ceiling at the same time that they pay the vast majority of federal income taxes with a top rate around 35%.

People who've lived a little remember when the poorest among us had one income tax rate, 15%, and the richest another, 28%. What makes those rates in principle unfair now?

Under them today's poorer Americans might actually pay some taxes for a change. And don't they have a responsibility to do so? Didn't Joe Biden tell us paying taxes was the patriotic thing to do? Back in the day the Senator's son got the deferment while the white trash got his ass shot off in Vietnam. Now the "deferment" goes to both the poor and the rich.

Wealthier Americans would see a decline in the rate of the federal tax they paid, that is true. But a broad-based single higher rate on income could be paired with an increase on the payroll tax cap. Why should people who make millions pay no Social Security tax on that income? Social Security is a regressive tax because it taxes the poor end the most and not the rich end. By distributing its pain on everyone equally maybe we would actually have an incentive going forward to put that boondoggle on a more solid footing once and for all, along with the rest of government.

To which end, Republicans should not compromise with the devil. If he won't bow and extend the Bush tax rates, and only the rates, permanently, then Republicans should let them expire. At least the rich will pay a little more, and the rest of us a lot more, and especially the poor. And Obama will get the blame.

BUSH SUBSIDIZED THE POOREST AMERICANS AND CUT THEIR TAXES 33%

Because George Bush was a flaming socialist. The left hated him as they did not because of the Iraq war but because he out-performed them as a liberal. And if Obama lets the Bush tax cuts expire, the poorest Americans will lose their subsidies and their taxes will go up 50%, and Obama will become a conservative and all will be well with the world!

In 2000, the top 60 percent of taxpayers paid 100 percent of all income taxes.

The bottom 40 percent collectively paid no income taxes.

Lawmakers writing the 2001 tax cuts faced quite a challenge in giving the bulk of the income tax savings to a population that was already paying no income taxes.

Rather than exclude these Americans, lawmakers used the tax code to subsidize them. (Some economists would say this made that group's collective tax burden negative.)

First, lawmakers lowered the initial tax brackets from 15 percent to 10 percent and then expanded the refundable child tax credit, which, along with the refundable earned income tax credit (EITC), reduced the typical low-income tax burden to well below zero.

As a result, the US Treasury now mails tax "refunds" to a large proportion of these Americans that exceed the amounts of tax that they actually paid.

All in all, the number of tax filers with zero or negative income tax liability rose from 30 million to 40 million, or about 30 percent of all tax filers.

The remaining 70 percent of tax filers received lower income tax rates, lower investment taxes, and lower estate taxes from the 2001 legislation.

Consequently, from 2000 to 2004, the share of all individual income taxes paid by the bottom 40 percent dropped from zero percent to minus 4 percent, meaning that the average family in those quintiles received a subsidy from the IRS.

By contrast, the share paid by the top quintile of households (by income) increased from 81 percent to 85 percent.

Expanding the data to include all federal taxes, the share paid by the top quintile edged up from 66.6 percent in 2000 to 67.1 percent in 2004, while the bottom 40 percent's share dipped from 5.9 percent to 5.4 percent.

Clearly, the tax cuts have led to the rich shouldering more of the income tax burden and the poor shouldering less.


Read the rest from Brian Riedl, here.