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REBATES AND NON-TAXPAYERS
January 24, 2008
One of the fights over the "stimulus" bill is whether to send income tax rebates to people who don't pay income taxes. The Tax Policy Blog points out that non-taxpayers are a growing constituency:
As the federal income tax has become more progressive, more and more Americans have been completely knocked off the tax rolls. In 2005, we estimated the total number of filers with no tax liability to be over 43.8 million. Add in typical growth over time, and people who don't file because they have little-to-no income at all, and we arrive at the 50-77 million figures cited by both Senator Clinton and Mr. Greenstein.Just to be clear, that means half of the households in America have no income tax liability - a number that's grown 50% since Bill Clinton left office and the Bush tax cuts were enacted.
Whoever said it's better to give than to receive wasn't talking about the tax system.
So do the working poor get nothing from the federal government? No - and in fact, quite to the contrary. The working poor are the biggest beneficiaries on the other side of the federal fiscal coin: spending.
They illustrate their point with this chart:
(Click to enlarge)
So rebates wouldn't really be the right word. "Transfer" would be more accurate.
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Comments
If, though, you're looking for a way to stimulate the economy, isn't the bottom of the pay scale the best place to start anyway? Odds are, those Americans with the lowest incomes also have the most pressing unmet or poorly met needs, and are most likely to push that rebate straight back into the economy by purchasing daily needs, home repairs, improving energy efficiency, etc.
I recognize that calling it a "rebate" when it's going to non-taxpayers is a poor choice of words, but if you're looking to hand out some cash to revitalize the economy, it probably is the smartest way.
Whether it should be done at all is another question, of course.
Posted by: Kyle Lobner | January 24, 2008 10:47 AM
Please don't fall into the rhetorical trap of confusing people who pay no federal income tax with "non-taxpayers." These folks, by-and-large, pay plenty of taxes, just not federal income tax. I've never seen anyone explain the reasoning behind targeting a stimulus package only to people who pay federal income tax (as opposed to, say, only to people who pay FICA/SECA, or only people who pay the estate tax, or only people who pay the excise tax on archery equipment, or some other more-or-less arbitrary class) but that weird conclusion seems to be taken for granted in many quarters.
Also, the Tax Foundation has some pretty weird methodology behind their idea of "households receiving government spending." For instance, when Washington airdrops a pallet full of $100 bills to Iraq or buys a bridge to nowhere in Alaska, the Tax Foundation counts this as American "households receiving government spending." And that's only one of the problems with the Tax Foundation's dishonest report.
See http://sniggle.net/Experiment/index.php?entry=26Mar07 and http://sniggle.net/Experiment/index.php?entry=28Mar07 for a closer look at their study, and http://sniggle.net/Experiment/index.php?entry=29Mar07#item3 for how the Foundation willfully misleads with its own data to give a false impression about government spending.
Posted by: David Gross | January 24, 2008 12:14 PM
Joe, do you actually read the studies when you post a graph or two? Because this study has at least a half dozen different charts showing the imbalance between tax payments and government spending, depending on which biases are chosen, and if you have read the study I would be curious which set of assumptions you would think are most appropriate, and why.
I understand the term income tax refund or rebate may seem misleading to some, it may be more honest and appropriate for people to advocate a payroll tax reduction or rebate.
Cheers!
Posted by: Erich Riesenberg | January 26, 2008 3:54 PM