On April 15 -- Tax Day -- we passed a landmark in the life of our republic. Almost half of U.S. households -- 47 percent, a record number -- paid no federal income tax for 2009, according to the Tax Policy Center in Washington, D.C. Either their incomes were too low or they qualified for enough deductions, credits and exemptions to wipe out their tax liability.
We hear continually that better-off Americans should pay their "fair share" of taxes. For President Obama and his allies in Congress, it's an article of faith that they don't. You'd never guess, from the clamor, that the top 1 percent of income earners pay a whopping 40 percent of all federal income taxes. (Yes, you read that right.) The top 5 percent pony up 60 percent, while the top 10 percent contribute more than 70 percent. The bottom 50 percent pay only 3 percent of total income tax revenues.
In 2009, we reached a point where almost half of American families did not contribute to the costs of our national defense, our federal welfare programs or our massive new hobby of federal bail-outs. (In 1990, in contrast, only 21 percent of families were nonpayers.) As federal spending soars and our country's mind-numbing deficit mounts, fewer and fewer of us are footing the bill.
The United States is becoming a nation where a swelling group of citizens -- not poor, but middle class -- is benefiting from government largesse wholly underwritten by another group. And here's a new wrinkle: Most families that don't pay federal income taxes will actually get a cash payment from Uncle Sam, courtesy of the tax code. The reason? A burgeoning number of refundable tax credits, which can eliminate all of a filer's income tax liability and then entitle him or her to a check for any value of the credit that remains.
In 2010, the three largest refundable credits -- including the earned income tax credit and the Making Work Pay credit, "will redistribute over $114 billion to the families that claim them," according to the Heritage Foundation's Curtis Dubay.
President Obama calls this "spreading the wealth around."
It's true that Americans who don't pay income tax do pay other kinds of federal taxes -- notably payroll taxes for Social Security and Medicare and gasoline and cigarette taxes. Nevertheless, true dependence on government is on the horizon for an increasing number of Americans. In 2004, the bottom 20 percent of U.S. households as a group received about 75 percent of their income from the government, according to a 2007 study by the nonpartisan Tax Foundation.
A more recent Tax Foundation study found that fully 60 percent of Americans are now consuming more in government benefits and services than they contribute in taxes. Under President Obama's tax and spending policies, the figure will rise to 70 percent, according to the study.
