Shocking Stats Reveal Who's REALLY Paying Taxes In America

By Tommy Wilson | Tuesday, 18 June 2024 04:30 PM
Views 6K

The American tax system is a complex and often contentious issue.

The financial burden of funding the government falls unevenly across the income spectrum, with the top 1% of earners contributing approximately 38.8% of all federal income taxes. In stark contrast, the bottom 20% of income earners, who often work minimally, pay little to no taxes and are recipients of government aid.

According to the Tax Policy Center, around 44% of U.S. households pay no federal income tax, largely due to low taxable income and tax credits such as the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC). These households, which fall in the bottom 20% of income earners, also receive transfer payments from government programs like Medicaid, the Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF), and housing assistance.

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In 2023, approximately 70.6 million Americans received benefits from programs administered by the Social Security Administration (SSA), including Social Security and Supplemental Security Income (SSI). Furthermore, in the 2022 fiscal year, around 41.2 million people were beneficiaries of SNAP.

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Critics argue that while low-income households may not contribute significantly to federal income taxes, they do contribute to other forms of taxation such as payroll taxes, sales taxes, and property taxes. However, these arguments are easily refuted. The Social Security contributions of the low-income group are minimal because they earn less money and work less frequently. Moreover, low-income workers can receive Supplemental Security Income (SSI), a needs-based program that provides cash assistance to disabled adults and children with limited income and resources, regardless of their work history or contributions to Social Security.

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The argument that the poor contribute to property taxes also falls short. The poor are less likely to own a home, and therefore, are less likely to pay property taxes, which fund public schools. Even though they do not contribute to property taxes, their children can still attend schools funded by other people's property taxes under Title I.

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Some may argue that renters indirectly pay property taxes through their rent payments, which landlords use to cover property taxes. However, in the current system of projects and state housing, the government is the owner, and no property taxes are paid. As a result, all the funding for local schools must come from other taxpayers in other neighborhoods.

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Middle- and high-income earners contribute significantly to payroll taxes, which fund Social Security and Medicare. Self-employed individuals pay both the employer and employee portions of these taxes, effectively paying double. These individuals often own businesses and create jobs, contributing to the economy and generating employment opportunities, while also paying the employer’s share of payroll taxes. This entrepreneurial activity supports economic growth and can lead to increased tax revenues.

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Another cost that taxpayers must bear is crime. Evidence shows that higher crime rates are associated with lower-income areas. Property crimes and other criminal activities impose significant costs on taxpayers due to law enforcement, judicial processes, and correctional services. However, individuals living in high-crime areas tend to pay little or no income tax. As a result, the cost of policing these areas falls on taxpayers in other neighborhoods, diverting money from public services in taxpaying areas to the policing of non-paying areas.

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Research from the Center for Poverty and Inequality Research at UC Davis suggests that a significant portion of children who grow up in poverty and receive public assistance continue to rely on these programs into adulthood. Approximately one-third to one-half of children who experience poverty for a substantial part of their childhood remain poor as adults. A study by the National Bureau of Economic Research (NBER) found that welfare receipt among parents significantly increases the likelihood of welfare participation among their children. This intergenerational correlation suggests that welfare use is, to some extent, a learned behavior, perpetuating the cycle of dependency.

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In essence, nearly half of the population is either paying no taxes, very little taxes, and/or receiving benefits. Every new social program for the non-payers represents a forced transfer of wealth from the working to the non-working and a transfer of government services from the taxpaying to the non-taxpaying. This situation raises questions about the fairness of the current tax system and the sustainability of social programs funded by a shrinking pool of taxpayers.

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