Friday, March 12, 2010

Non-Payers Grow to 36% Of Tax Filers

I had been wondering about the way that "credits" and income-limited deductions had been reducing the tax burden on lower-income individuals and families in recent years. It always felt like a strong "hockey stick" model in which taxes paid stayed relatively low until you reached a certain income and your taxes (as a percentage of income) suddenly exploded up. I'm not just talking about the progressive tax rates themselves -- I'm also talking about the various credits and deductions that get eliminated at different income levels.

Mark Perry has a great blog, and he recently posted the following charts from the Tax Foundation showing the percentage of filers who pay no federal taxes (now at 36%) and the income level at which you pay no taxes.

The statistic that bothers me the most is the rapid growth of non-paying filers to 51 million, or 36% of all filers. Add to that huge number the millions of non-filers and you've got an enormous block of people who (rightly? naively?) believe they can vote themselves any benefit or entitlement and will not pay a dime toward it.

At what point does the process become untenable, with a non-paying majority holding guns to the heads of the paying minority and demanding higher and higher levels of benefits? As the boomers retire, we may find out.

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