income tax credits loopholes april 15

People still pay for social security and medicare but Ö
withholding deductions public revenue

Half of Americans pay no federal income tax

Which half are you in? Do you know anybody in the half not paying income taxes? We donít, which makes us wonder about these data. This 2010 article is from the Associated Press, April 7.

by the Associated Press

About 47 percent of US taxpayers 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.

Most people still are required to file returns by the April 15 deadline. The penalty for skipping it is limited to the amount of taxes owed, but it's still almost always better to file: That's the only way to get a refund of all the income taxes withheld by employers.

In recent years, credits for low- and middle-income families have grown so much that a family of four making as much as $50,000 will owe no federal income tax for 2009, as long as there are two children younger than 17, according to a separate analysis by the consulting firm Deloitte Tax.

Tax cuts enacted in the past decade have been generous to wealthy taxpayers, too, making them a target for President Barack Obama and Democrats in Congress. Less noticed were tax cuts for low- and middle-income families, which were expanded when Obama signed the massive economic recovery package last year.

The result is a tax system that exempts almost half the country [ed note: from paying for military adventurism, interest on debt, corporate welfare, besides some programs most people might like]. It is a system in which the top 10 percent of earners -- households making an average of $366,400 in 2006 -- paid about 73 percent of the income taxes collected by the federal government.

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.

The vast majority of people who escape federal income taxes still pay other taxes, including federal payroll taxes that fund Social Security and Medicare, and excise taxes on gasoline, aviation, alcohol and cigarettes. Many also pay state or local taxes on sales, income and property.

The federal income tax is the government's largest source of revenue, raising more than $900 billion -- or a little less than half of all government receipts -- in the budget year that ended last Sept. 30. But with deductions and credits, especially for families with children, there have long been people who don't pay it, mainly lower-income families.

The number of households that don't pay federal income taxes increased substantially in 2008, when incomes fell and Congress cut taxes.

In 2007, about 38 percent of households paid no federal income tax, a figure that jumped to 49 percent in 2008.

Besides child credits, there are also tax credits for college expenses, buying a new home, and upgrading an existing home with energy-efficient doors, windows, furnaces, and other appliances. Many of the credits are refundable, meaning if the credits exceed the amount of income taxes owed, the taxpayer gets a payment from the government for the difference.

Such credits made it relatively easy for families of four making $50,000 to eliminate their income tax liability. Here's how:

The family was entitled to a standard deduction of $11,400 and four personal exemptions of $3,650 apiece, leaving a taxable income of $24,000. The federal income tax on $24,000 is $2,769.

With two children younger than 17, the family qualified for two $1,000 child tax credits. Its Making Work Pay credit was $800 because the parents were married filing jointly.

The $2,800 in credits exceeds the $2,769 in taxes, so the family makes a $31 profit from the federal income tax. That ought to take the sting out of April 15.

JJS: What about millionaires who get huge amounts back? What about the subsidies that create their fortunes in the first place? And would any of this matter if we used genomics and paid for land and nature to government and got back dividends from surplus rents?

---------------------

Jeffery J. Smith runs the Forum on Geonomics.

Also see:

Tax Deal Signed between US and Swiss, UK and Liechtenstein
http://www.progress.org/2009/taxhaven.htm

End All Taxes -- Except One
http://www.progress.org/2009/scottish.htm

Most private fortunes come from public favors
http://www.progress.org/2009/teaparty.htm

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