Texas Senator John Cornyn is aflutter over this factoid: 52% of Americans pay zero income tax, he says?
Say what? That’s way higher than I would ever dream!
The committee’s report further showed: While 22 percent of taxpayers owed no income taxes, about 30 percent were refunded enough that their net income increased, thanks to special types of tax credits that mostly go to people earning less than $30,000 a year. (The largest such credit is the Earned Income Tax Credit, which cost the government about $55 billion in 2010.)
Some say these “refundable” credits are building blocks of the welfare state, but I wonder, given the complexity of the tax code, how anyone without a CPA can even figure out how to get them. In any case, the high unemployment rate may have inflated this figure and experts estimate that in normal times, 35 to 40 per cent of households owe no income tax. Cornyn argues that we need to clean up these wasteful tax credits before we tax “the rich.”
Of course, the rich have many other loopholes to choose from. And guess where fingers are being pointed: the mortgage interest deduction. The Tax Policy Center says this nifty deduction provides the largest benefits to taxpayers earning more than $200,000 a year. Could be because of deductions on second homes, of which there are about 10 million in the US. And it cost the government $103 billion in 2010.
So now our definition of “rich” has become those who make $200,000 a year or more?
” …the bottom 20 percent of income earners score (save) about $1,000, on average, through the tax code. Middle-income households use tax breaks to reduce their tax liability by an average of $4,000. The top 1 percent of taxpayers — the very rich — reduce their tax liability by nearly $275,000 on average.”
I would argue that the home mortgage tax deduction is used more by middle-income households.
According to the Tax Policy center, getting rid of the estimated $1 trillion in tax breaks would still fall on the backs of the poor: the bottom 20 percent of households would see tax liability increase 275 percent, whereas the top 20 percent would pay about 41 percent more.
I give up. We’ve woven ourselves into a web so complex, I do not even know where to begin unravelling.