As someone interested in the future of the United States (who just happens to be a tax professional), I find it particularly interesting to listen to tax-related news commentary and examine related tax statistics.
Because this is an election year, obviously many more people are tuned into tax issues.
Here’s a particularly interesting video clip I found via the Tax Foundation blog this week. It’s a FOX News segment on people who don’t pay anything toward federal income taxes and what that could mean for the future of income taxes.
Here are two important points I noted in this presentation:
- Nearly 1/2 of all Americans don’t pay any federal income taxes.
- Top 10% of earners pay 71% of all income tax.
According to Scott Hodge, President of the Tax Foundation, a recent survey revealed that 2/3 of Americans think believe everyone should pay at least something towards the basic cost of government (15 % were unsure and 19% thought it was fair).
Why do so many people not pay taxes? In part, the Bush Tax Cuts are responsible for millions of people dropping off the taxpayer list. Those who would have otherwise paid a little bit in taxes received more Child Tax Credit benefits and enjoyed lower overall tax rates pursuant to the Bush Tax Cuts.
As you all know, I am a tax accountant (although I only work from home part-time in a non-tax capacity other than this blog). My husband is an engineer. How much federal income tax did we pay last year? I won’t tell you an exact amount or percentage, but I will say that our effective federal income tax rate was substantially lower than the lowest tax rate of 10%. Do you think that’s fair?
I’ll be the first to say that I think our tax rate is ridiculously low, considering how many government services are at our disposal. We have a roof over our heads, food in the fridge, extra money to spend on the little things, we save for the future and we donate to charity, so I don’t think it would be out of line to expect to have to pay even just a little bit more in federal income taxes.
What do you think? Should a household like ours be expected to contribute more? I’m interested to hear what you have to say!
Other questions this segment brought to my mind:
- Is income tax a wealth tax? Should it be?
- Do you believe in redistribution of income?
- Should Bush Tax Cuts be extended? What’s best for the future of our country?
- Is the United States a culture of growing dependency? If so, what will happen when the majority runs out of “other people’s money” to pay the bills?
- Is major tax reform inevitable? What will it look like?
If you are so inclined, feel free to address one or more of the points above.