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Half of American households pay no income taxes

Sound bytes from politicians often promote class warfare... citing how evil "tax cuts for the wealthy" are and pressing for more tax relief for the lower and middle classes. Listening to them, you would think that the lower and middle classes are carrying a disproportionately high share of the tax burden, wouldn't you?

Well it's time to debunk that myth with a little dose of reality. The Tax Foundation puts American income taxes in perspective with these facts. The organization's analysis of the tax laws and rates indicates that have of American households pay no income tax at all.

In fact, many millions of households actually get far more money from the federal government than they have ever paid in income taxes. A study released last year by the Tax Foundation compared the amount of taxes paid by individuals versus the value of government spending received.



The study showed that the bottom 20% of households in America receive almost $15 in federal spending for each $1 they paid in federal taxes. In contrast, the top 20% of American households received only 32 cents in federal spending for each $1 they paid in federal taxes.

Why is it this way? Lower income families often have no income tax burden under our system, and are even entitled to certain refundable credits. So if we want to put the income tax burden in perspective, this is really an important analysis. Instead of listening to politicians pander for votes with cries of a huge financial burden on the lower class taxpayers, maybe we should be standing up and asking them to be more honest with their claims.

Why is this issue coming up now? Well the proposed "tax rebate" checks are going to be given to many Americans, including those who didn't even pay any income taxes. It's not much of a "rebate" if you didn't pay taxes in the first place. It's more of a handout, and maybe we'd do everyone a favor if we called it what it is. Another step toward Socialism.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.

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