Now let's talk about those Americans who legally don't pay federal income taxes. A terrific Money Magazine article from this past March explained that a whopping 49.2 million households filed returns last year that obligated them to pay no federal income tax. Important: That doesn't include 15 million Americans who were too poor to even file income tax returns.
Most of the members of the zero-tax club are not, as you might imagine, yachting off the Cayman Islands. The tax shelters of yore provide little protection, since most of those loopholes closed in 1986. Only 2% of America's richest 20% (those earning $99,500 and up) are escaping federal income taxes. They account for only 400,000 of the nearly 50 million tax-free filers.
92% of the zero-tax crowd are earning less than $30,000. But as the article points out...
Your annual income wouldn't have to be quite as low as you'd imagine for you to be free of the income tax. Because of deductions, credits and exemptions, a family of four can earn about $43,000 and pay nothing. For a single person without kids, that threshold is $10,300.
Still not a lot of money to be taking home. So would anyone intentionally make so little, just to pay no taxes? You betcha'. From the article:
Few among us would want to settle for a drastically lower income just to avoid taxes. But David Gross did just that. After the 2003 invasion of Iraq, the 39-year-old technical writer decided that he didn't want his tax dollars funding the war. Only by earning less, he realized, could he stay within the law.
At the time his salary came to about $100,000 a year. He asked his employer to pay him far less - some $70,000 less - but was turned down. So he quit and launched a business from his apartment, strictly limiting his earnings.
In 2007 his income was $29,000. He put $2,850 in a health savings account, $4,500 in a simplified employee pension (SEP) and $4,000 in an IRA. Since he works freelance, he can deduct half of his self-employment tax ($1,850) and his health insurance premium ($1,200), leaving him with an adjusted gross income (AGI) of $14,600.
After taking the standard deduction and one exemption, his taxable income neared $6,000 and his tax was $493. Low-income earners like Gross are also entitled to a credit for retirement plan contributions. His came to $500 and - poof! - no tax bill.
Even though many of the 50 million zero-filers are paying Social Security, Medicare, state, property and sales taxes, they're not paying federal income taxes -- the taxes we hate most.Do the zero-payers have a right to vote for President, the highest federal office? Is voting a right of all citizens (there is no Right to Vote in the Constitution)? Or is it a privilege, something that is earned? If so, is contributing to the federal kitty a fair yardstick?
92% of the zero-tax crowd are earning less than $30,000. But as the article points out...
Your annual income wouldn't have to be quite as low as you'd imagine for you to be free of the income tax. Because of deductions, credits and exemptions, a family of four can earn about $43,000 and pay nothing. For a single person without kids, that threshold is $10,300.
Still not a lot of money to be taking home. So would anyone intentionally make so little, just to pay no taxes? You betcha'. From the article:
Few among us would want to settle for a drastically lower income just to avoid taxes. But David Gross did just that. After the 2003 invasion of Iraq, the 39-year-old technical writer decided that he didn't want his tax dollars funding the war. Only by earning less, he realized, could he stay within the law.
At the time his salary came to about $100,000 a year. He asked his employer to pay him far less - some $70,000 less - but was turned down. So he quit and launched a business from his apartment, strictly limiting his earnings.
In 2007 his income was $29,000. He put $2,850 in a health savings account, $4,500 in a simplified employee pension (SEP) and $4,000 in an IRA. Since he works freelance, he can deduct half of his self-employment tax ($1,850) and his health insurance premium ($1,200), leaving him with an adjusted gross income (AGI) of $14,600.
After taking the standard deduction and one exemption, his taxable income neared $6,000 and his tax was $493. Low-income earners like Gross are also entitled to a credit for retirement plan contributions. His came to $500 and - poof! - no tax bill.
Even though many of the 50 million zero-filers are paying Social Security, Medicare, state, property and sales taxes, they're not paying federal income taxes -- the taxes we hate most.Do the zero-payers have a right to vote for President, the highest federal office? Is voting a right of all citizens (there is no Right to Vote in the Constitution)? Or is it a privilege, something that is earned? If so, is contributing to the federal kitty a fair yardstick?
Reader Comments ( Page 1 of 1)
1. They may not have paid federal income tax, but they are participating in the economy. Therefore, they should have a say in things affecting the economy.
mo-NEEK-a at 10:16PM on Oct 23rd 2008
2. Forgive me, babe, if this post doesn't make sense. (I'm sleepy.)
I voted "yes" for both questions because some people may have found themselves in circumstances that are beyond their control. Like those who receive Disability payments, or those who may have been laid off.
Circumstances vary for each individual, which makes it difficult to broad-brush.
Yet, I can't help but feel a little annoyed by someone who intentionally avoids paying taxes and gets away with it, even if it's for a "noble" reason.
giftedgirl at 1:53AM on Oct 24th 2008
3. Give me a break. Are you saying stay at home parent, who are almost exclusively women, should not be entitled to vote? Why not a rule that people who don't pay at least 50,000 per year in taxes have no right to vote? Or 100,000 a year in taxes? Or only people who own property...or only those who have served in the military....
Bettybb at 2:24AM on Oct 24th 2008
4. As one of those aforementioned stay-at-home mom's, I absolutely think people who legally don't have a tax bill should be able to vote! Our tax bill may not include income tax but what about all the sales tax and property tax we pay?! That alone should earn us a place in line at the polls!
dswanzer at 10:31AM on Oct 24th 2008
5. Money isn't everything.
JillJG at 11:26AM on Oct 24th 2008
6. Is anyone actually suggesting that they SHOULDN'T be allowed to vote?
Can't recall ever having heard that mentioned - anywhere.
bob at 12:51PM on Oct 24th 2008
7. Even if you don't pay the federal income tax, you pay other taxes, so it's not as though even the Iraq War tax protester was totally avoiding contributing to Uncle Sam's coffers. Anyway, citizenship is good enough in my book to "earn" you the right to vote.
The real question is should people who carry their small dogs with them into grocery stores as though they were a kind of apparel and not a dog be allowed to vote.
Lindsay at 11:33PM on Oct 24th 2008
8. mo i forget the speaker, Shaw, Mc Cauly , Chesrton, who said that democracy can not exist long. for the have nots will take from the haves. But is was jesse Jaackson who said "an organized minority is a majority" and good old Ben Franklyn said"when the people find they can vote themseves money, that will herald the end ofthe Republic".
robert lipton at 12:17PM on Oct 26th 2008