61% of Americans paid no income taxes in 2020

wjossey 2021-08-19 14:37:44 +0000 UTC [ - ]

Important to note to non Americans that this does not mean that 61% paid no taxes, it’s that they didn’t pay a specific type of tax (income at the federal level).

Individuals likely still paid Social Security taxes, Medicare taxes, and potentially state and local taxes (which vary wildly). Most states also have sales taxes as well, and some local municipalities have surcharges as well.

And, lastly, we do have property taxes, which can be quite significant in large parts of the country. Even if you’re a renter, these costs are often indirectly passed on to you.

So, while federal income tax may have been less of a burden last year, there was likely still lots of taxes that each of these individuals paid.

Disclaimer: This post isn’t meant to be a statement of support or criticism of taxes. Just trying to highlight the many ways we pay taxes beyond federal income tax.

bluedevil2k 2021-08-19 14:44:37 +0000 UTC [ - ]

To build off your details, many Americans also received a net payment back for federal taxes through the Earned Income Tax Credit (effectively a negative income tax).

tyingq 2021-08-19 15:37:43 +0000 UTC [ - ]

Good list. I'd add federal fuel taxes to that as well.

throwaway0a5e 2021-08-19 15:20:17 +0000 UTC [ - ]

Don't forget sales taxes, taxes on specific goods, fees for required government services and all the other regressive taxes that states impose.

300bps 2021-08-19 14:45:26 +0000 UTC [ - ]

You’re correct but don’t take into consideration things like child tax credits.

I have family members that pay a total of $400 in tax yet receive a $9,000 or more “refund” due to various credits.

So yes, there is a sizable portion of the population that literally pays a negative tax rate even when factoring in all of the taxes you mentioned.

michaelmrose 2021-08-19 15:08:14 +0000 UTC [ - ]

This is probably because the top 10% earns almost half of income in America, the next 40% of America shares about 38% and the bottom HALF of Americans share less than 12% between them.

As far as wealth this bottom half also holds 2% of the net worth.

It should be unsurprising that people who have nothing aren't paying much.

refurb 2021-08-19 15:15:35 +0000 UTC [ - ]

Sure, but you’re ignoring just how progressive the US federal tax system is.

And in fact, many of the state income taxes are too. A few states have flat taxes (but with healthy exemption), the other have brackets that steeply increase.

michaelmrose 2021-08-19 15:20:41 +0000 UTC [ - ]

You mean except for all the taxes other than income tax such that people making french fries often pay a bigger percentage of their incomes to taxes than billionaires?

adventured 2021-08-19 16:04:31 +0000 UTC [ - ]

> You mean except for all the taxes other than income tax such that people making french fries often pay a bigger percentage of their incomes to taxes than billionaires?

That's a false claim. The recent propaganda being pushed - eg by ProPublica - about billionaires supposedly paying low income taxes, of course, didn't center on income taxes at all. It intentionally reframed the premise to be that billionaires weren't paying enough taxes on their wealth (assets).

For example this article con line from ProPublica:

Headline: "You May Be Paying a Higher Tax Rate Than a Billionaire"

Summary: "A new ProPublica analysis of a trove of IRS documents revealed that the richest 25 Americans pay a tiny fraction of their wealth in taxes."

So I might be paying higher taxes on my unsold stock holdings than Bezos is on his unsold stock holdings? Of course not. ProPublic is being intentionally deceptive.

The billionaires are paying a small share of their wealth in taxes every year. They pay high income taxes, when they generate high incomes. Wealth isn't income. ProPublica knows that separation, they know how the tax system works, they spun the con regardless for propaganda points. ProPublica is trying to argue in favor of wealth confiscation policies, while lying and pretending they're arguing in favor of the billionaires paying higher taxes akin to paying higher income taxes. The spin is remarkable for just how disingenuous it is.

Bezos isn't paying enough income tax on his unsold Amazon stock holdings? Golly gee.

pseudalopex 2021-08-19 16:47:16 +0000 UTC [ - ]

The ProPublica article examined effective income tax rates. Not what you said. It even said they used the IRS definition of total income tax.[1]

Long term capital gains are taxed less than all but the lowest income brackets. Social Security tax is capped. And sales tax is regressive.

[1] https://www.propublica.org/article/you-may-be-paying-a-highe...

rootusrootus 2021-08-19 15:25:17 +0000 UTC [ - ]

Federal income tax is somewhat progressive. All of the state taxes, last time I checked, are regressive. For a while the least regressive was Oregon (which has a progressive income tax) and the most regressive was next door, Washington, which uses a sales/use tax instead.

credit_guy 2021-08-19 17:03:12 +0000 UTC [ - ]

>> All of the state taxes, last time I checked, are regressive

Wait, what? The state tax in New York State is certainly progresive: it starts at 4% if you earn less than $8k, and goes up to 10.9% on incomes above $25 MM [1]. California is much more progressive: 1% for less than $9k, 13.3% above $1 MM [2].

[1] https://www.nerdwallet.com/article/taxes/new-york-state-tax

[2] https://www.hrblock.com/tax-center/filing/states/california-...

onlyrealcuzzo 2021-08-19 15:09:46 +0000 UTC [ - ]

This shouldn't be surprising.

There have been millions of people on SNAP & HUD & Medicaid with no income for a long time. There's just more programs and a lot more people now.

This time, however, it seems like these new programs are quite massive and are more "want" based than "need" based.

It's quite obvious people with no income and kids "need" money. It's less obvious to me that people who had kids for years, and still have their jobs, suddenly need $1k per month. I don't think anyone would debate whether this $1k is improving their lives.

refurb 2021-08-19 15:14:11 +0000 UTC [ - ]

Is social security and Medicare a “tax”?

Maybe Medicare since what you contribute is only partially linked to the benefit.

But social security is basically a public pension plan. What you contribute determines your benefit. You can even calculate the benefit yourself. No different than a private pension plan.

gwbrooks 2021-08-19 17:09:07 +0000 UTC [ - ]

It meets the tests of a tax: You can't opt out and the payee has a legal right to use the threat of violence against you in pursuit of payment.

toast0 2021-08-19 16:18:37 +0000 UTC [ - ]

I think Medicare is clearly a tax, it can't be an insurance program because there's no connection between 'premiums' and benefits.

Social security is nominally a government sponsored pension, but the payout ratios are weird, and it's compulsory, so I feel it's fair to call it a tax.

Same with at least the employee portion of compulsory unemployment insurance. Maybe that's generally an actuaraily sound program (I think the employer contributions may be), but in times of economic stress, payments increase and I don't think that's covered by premiums. I know there's a cap on benefits, but I'm not sure if there's a cap on contributions? Anyway, seems similar to Medicare and I'd call it a tax, too.

pwned1 2021-08-19 15:27:15 +0000 UTC [ - ]

Although there is a "social security trust fund," it's an accounting fiction. Functionally the money you contribute goes to the general US treasury fund and payments to beneficiaries come from the general US treasury fund. It's really just a pay as you go entitlement.

ghaff 2021-08-19 15:15:55 +0000 UTC [ - ]

>What you contribute is what you get out.

There's some correlation between in and out but the government isn't figuratively putting the money into a savings account for you.

headShrinker 2021-08-19 15:28:04 +0000 UTC [ - ]

> What you contribute is what you get out

That simply can’t be because what you get out is based on how long you live, which is a ‘known, unknown’

fred_is_fred 2021-08-19 15:07:11 +0000 UTC [ - ]

Thank you for this. This is often positioned as "paid no tax" and often people in these categories paid a very large percentage of their incomes in sales and other taxes.

Proven 2021-08-19 15:17:32 +0000 UTC [ - ]

But you're hopelessly wrong.

As another commenter said they also receive federal and other benefits and almost invariably take more than they contribute. They're takers.

megaman821 2021-08-19 15:06:18 +0000 UTC [ - ]

Of those 61% that paid no taxes, I am willing to bet a vast majority of them will take more benefit out of Social Security and Medicare/Medicaid than they ever put it. Even looking at the total tax burden the US and states barely take anything from the lowest two quintiles.

BitwiseFool 2021-08-19 14:38:58 +0000 UTC [ - ]

People don't realize that when the Income Tax was first proposed it was predicated on the idea that most Americans would not end up paying it. As you can imagine, it was only for 'the rich' to pay.

The first tax bracket was a measly 1% on income over $3,000 at the time, which WolframAlpha says is about $80,500 today.

https://www.wolframalpha.com/input/?i=%243%2C001+in+1913+USD https://en.wikipedia.org/wiki/Income_tax_in_the_United_State...

EDIT: I needed to correct myself, according to the IRS "Congress adopted a 1 percent tax on net personal income of more than $3,000 with a surtax of 6 percent on incomes of more than $500,000."

Thank you to alecst for correcting me.

alecst 2021-08-19 15:02:39 +0000 UTC [ - ]

Your numbers don't seem right to me. For people who want more context than this comment provides, please start here:

https://www.irs.gov/newsroom/historical-highlights-of-the-ir...

Some highlights:

> 1862 - President Lincoln signed into law a revenue-raising measure to help pay for Civil War expenses. The measure created a Commissioner of Internal Revenue and the nation's first income tax. It levied a 3 percent tax on incomes between $600 and $10,000 and a 5 percent tax on incomes of more than $10,000.

> 1909 - President Taft recommended Congress propose a constitutional amendment that would give the government the power to tax incomes without apportioning the burden among the states in line with population. Congress also levied a 1 percent tax on net corporate incomes of more than $5,000.

> 1913 - As the threat of war loomed, Wyoming became the 36th and last state needed to ratify the 16th Amendment. The amendment stated, "Congress shall have the power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration." Later, Congress adopted a 1 percent tax on net personal income of more than $3,000 with a surtax of 6 percent on incomes of more than $500,000. It also repealed the 1909 corporate income tax. The first Form 1040 was introduced.

> 1918 - The Revenue Act of 1918 raised even greater sums for the World War I effort. It codified all existing tax laws and imposed a progressive income-tax rate structure of up to 77 percent.

Also something many people don't realize is that in the '50s the highest marginal tax rate was 91%, for $4M or more. (The lowest was 20% for $40K or less.) So I don't totally see how your comment relates to the article. You can draw diverse conclusions looking backwards.

BitwiseFool 2021-08-19 15:07:56 +0000 UTC [ - ]

This is a good catch. I will edit my parent comment accordingly.

alecst 2021-08-19 15:23:36 +0000 UTC [ - ]

While I appreciate your perspective, you seem to have cherry-picked a particular instantiation of the income tax to make a point, which I think dovetails with the last sentence in my original post. You can draw lots of conclusions by looking backwards.

2021-08-19 15:21:00 +0000 UTC [ - ]

bwb 2021-08-19 14:48:47 +0000 UTC [ - ]

Sure, and back then people didn't fathom flying, tanks, or space exploration either.

Good thing we learned better :)

simonsarris 2021-08-19 14:53:17 +0000 UTC [ - ]

If you break down what the US gov spends money on it is absolutely not those things. The US is mostly in the business of insurance (welfare, healthcare) and "education". Defense and infrastructure come some time after those.

Of the things they could fathom, they might have even been better at them. Certainly better per dollar spent.

alecst 2021-08-19 15:10:52 +0000 UTC [ - ]

For you guys getting in the weeds about how the govt spends money, here's the data: https://www.usaspending.gov/explorer/budget_function

thecage411 2021-08-19 15:04:41 +0000 UTC [ - ]

This isn't accurate if you are talking about the federal level. A better model in terms of spending is that the federal government is an insurance company with an army.

The federal government spends something like 10 times as much on defense as direct educational expenditures and it's still significantly more than education if you include things like loan financing in education.

rsj_hn 2021-08-19 16:15:46 +0000 UTC [ - ]

Given that education funding is done by the states, that's like saying the Federal government spends 10 times as much on welfare as on police and firefighting.

I mean, OK, but that's only because the second part of your comparison isn't a federal government responsibility and there are only certain targeted initiatives (mostly pork-barrel) that fall into that category. Same for federal spending on education.

But when you look at all government spending on education, it's very clear that we spend more on education (5% of GDP, not counting loan guarantees) than on defense (3.7% of GDP). Except education is funded by local government whereas defense is funded by the federal government.

frockington1 2021-08-19 14:56:35 +0000 UTC [ - ]

All of those increase in cost much faster than inflation

lostcolony 2021-08-19 15:06:20 +0000 UTC [ - ]

Not sure that's all that meaningful though? I mean, the inflation rate is effectively an average of the increase in costs across a variety of goods. Either that average is non-representative of the actual increase in costs (so meaningless), or that average is representative, but still an average, in which case you would still expect outliers, both above and below the average inflation rate.

You would need the second derivative to be meaningful (and maybe that's what you mean), the percentage increase compared to the percentage increase in inflation (i.e., if in one year inflation is 2% and healthcare costs increase 4%, and the next year inflation is 2%, and healthcare costs are > 4%, and this trend continues, that would be concerning)

pedrosorio 2021-08-19 15:59:46 +0000 UTC [ - ]

I think this is what they are referring to: https://www.aei.org/wp-content/uploads/2019/01/cpichart2019....

bwb 2021-08-19 14:54:13 +0000 UTC [ - ]

Yes and those things are fantastic, as they provide the platform we all run on.

zionic 2021-08-19 15:02:25 +0000 UTC [ - ]

Hardly, those things are parasitic load that prevents the platform from growing and prospering.

They also breed dependence and servitude to the centralized authority, many of which are even designed such that working and earning income puts you in a worse spot than not.

The people in charge aren’t stupid, it works this way by design.

BitwiseFool 2021-08-19 14:58:51 +0000 UTC [ - ]

It serves as a cautionary tale. Just keep in mind that whenever some politician proposes a tax only on the richest Americans, and that tax is very very small, it won't stay that way.

The highest rate in 1913 was 7%. Today the lowest rate is 10%.

danans 2021-08-19 15:05:31 +0000 UTC [ - ]

> The highest rate in 1913 was 7%. Today the lowest rate is 10%.

Those rates seem selected to support your point. For example, you left out that highest rate in 1944 was 94%.

There is also quite a bit of historical context that you are omitting. In 1913, without social security, common people in the US were impoverished in old age. The country had little infrastructure.

It's not as simple as "taxes only go up".

BitwiseFool 2021-08-19 15:19:42 +0000 UTC [ - ]

I didn't include the 1944 rates because I only wanted to mention the top rate at the time of the adoption/passage of the 16th amendment and the income tax. My point was, at the time, the public was told the rates would be low and only on top earners. Then overtime, the rates rose while the brackets kept expanding downwards to include more and more of the middle and lower class. My point was not 'taxes never go down' but rather, taxes expand to include more and more people, despite originally being told they would not.

refurb 2021-08-19 15:24:29 +0000 UTC [ - ]

If their point was taxes start low and go up, you rather proved it didn’t you?

danans 2021-08-19 17:03:50 +0000 UTC [ - ]

My point was not to refute that taxes went up, but rather that they didn't go up in a vacuum.

Wars were financed, population and productivity increased by huge amounts, and the entire economy shifted from an agrarian to an industrial one. The country's massive physical, social and and human infrastructure was built, one that the current high standard of living is still largely dependent on.

It is highly motivated reasoning to only highlight the tax rate increases without the sweeping societal changes that accompanied them.

nazgulnarsil 2021-08-19 16:49:57 +0000 UTC [ - ]

Reminder that the bottom 50% of the population by income pays 3% of federal tax receipts. Collecting tax from them is theater designed to make taxation seem more fair, but after frictional costs of collection + deadweight losses are accounted for this is likely net negative.

throwawayboise 2021-08-19 14:39:06 +0000 UTC [ - ]

I got downvoted last time I said this, but with fiat money there is no reason for anyone to pay income taxes. Obviously there is no correlation between income tax revenue and government spending. They just create the money they need, the never-to-be-paid-off deficit grows, the value of the dollar shrinks, and we move on.

Taxes serve as a means of coercing the behavior of the citizens, in the sense that certain things are rewarded with tax deductions or credits, and other things are punitively taxed. That is the reason they still exist.

We should just do away with taxes. People's work and business activity, conducted in terms of US dollars, creates value. The government takes some of that value by simply creating more dollars. Why do we need a huge, complicated taxing bureaucracy in the middle of it?

HPsquared 2021-08-19 14:43:59 +0000 UTC [ - ]

If there was no taxation, there would be no "compelling" reason for anyone to keep using the currency (which would be also losing value directly by the increase in money supply from government spending). In other words, even under MMT taxation is necessary to limit inflation.

pxue 2021-08-19 14:58:30 +0000 UTC [ - ]

Is that 100% true though?

Some estimate maybe only 10% of Chinese individuals pay tax. Individual taxes account only about 8% of China's tax revenues.

Bulk of the tax burden comes from consumption and business.

I'm all for that. If I make a million dollars but I live frugally and invest my money, why should I pay 50%?

Sure the argument for individual taxes are about social wellness but how do you justify that when businesses are avoiding billions of tax legally.

Make no sense.

HPsquared 2021-08-19 15:08:51 +0000 UTC [ - ]

That's fair enough, I was more referring to overall taxation in the economy creating a stable demand for the currency, it doesn't have to be levied on personal income specifically.

arbitrary_name 2021-08-19 15:09:23 +0000 UTC [ - ]

Because you likely made a million dollars using the benefits of the government. I.e. you had an educated workforce who drove on government roads to get to the factory, you were able to protect your ideas via copyright with the threat of government enforcement, etc.

Nobody gets rich by themselves unless they are a pirate.

adolph 2021-08-19 15:22:36 +0000 UTC [ - ]

> Nobody gets rich by themselves unless they are a pirate.

Is your claim that pirates generate economic value even in the absence of other people?

Or is it a claim that pirates lived in anarchical democratic communities whose thriving in the absence of government exemplifies Taleb's idea of anti-fragile?

rsync 2021-08-19 15:16:44 +0000 UTC [ - ]

"If there was no taxation, there would be no "compelling" reason for anyone to keep using the currency ..."

This is correct.

Remember: no matter what you have and no matter how valuable it is - you cannot pay your taxes with anything but your local currency. This is not a coincidence.

You cannot pay your taxes with gold bricks or with diamonds or with the Mona Lisa. You cannot trade highly liquid stocks or valuable real estate. You must sell those things to buy dollars.

It will never be otherwise. The point of the dollars is to have something that you must buy in order to pay your tax dues.

thehappypm 2021-08-19 15:26:46 +0000 UTC [ - ]

This actually expands further than taxes and expands to all government services. Water bill, inspections, sewer. Those institutions will always only accept dollars, and that backstops the value.

Thought experiment: rampant inflation happens and the dollar inflates 10x. My $1M house is now worth $10M. It's reassessed (because I don't live in California) and now my tax bill is suddenly $100,000 / year instead of $10,000! I need to acquire $100,000 or I go to jail. So I start selling assets into dollars. This deflates the dollar. Everyone does this simultaneously and the dollar goes back to its natural value.

300bps 2021-08-19 14:46:58 +0000 UTC [ - ]

Not sure why you’re getting downvoted.

Having to pay taxes in US dollars or go to jail is a strong incentive for people to continue their business operations with US dollars.

spywaregorilla 2021-08-19 14:54:12 +0000 UTC [ - ]

This is effectively arguing that because the eventual end state is the same, it doesn't matter what path we take to get there. But that's not true, it matters a lot, and there's a universe of externalities to what you suggest.

Deciding we're just not going to collect taxes anymore and that we'll pay off debts by printing out extra dollars would have enormous effects on bond prices, international trade, the US dollar benefiting from being the premiere currency of the world, etc.

Stupid idea.

jaguar1878 2021-08-19 15:48:12 +0000 UTC [ - ]

Taxes are hugely complicated because they are trying to do two different things at the same time: combat inflation and enact policy.

If we just printed dollars to pay for all gov expenses, we would probably have a lot of inflation. Inflation hits all holders of dollars equally (on a percentage basis). Taxes allow us to spread the burden of shared costs (like infrastructure) in a different way.

Additionally, taxes act as a feedback mechanism on behavior. We can incentivize some things by giving tax credits for doing them, and we can disincentivize other things by charging higher taxes on them.

Balancing these two effects of taxes: inflation and policy, is hard. If the gov. wants to encourage everyone to buy an electric vehicle, we could give a big tax incentive to do so, but that reduces overall taxes, which means more inflation. To combat this, we have to print fewer new dollars or increase taxes somewhere else.

This is one of the big challenges for the Federal Reserve, they don't get to pick how much tax is collected, just how many new dollars are printed. If congress doesn't collect enough tax, there's only so much the Fed can do to balance things.

coralreef 2021-08-19 14:45:20 +0000 UTC [ - ]

Taxes remove money from circulation, helping to control the inflation caused by creating new money.

Turing_Machine 2021-08-19 15:40:32 +0000 UTC [ - ]

So your thesis is that the government just sits on the tax money, rather than using it to purchase goods and services as fast as it comes in?

jfengel 2021-08-19 16:53:34 +0000 UTC [ - ]

Under Modern Monetary Theory, it doesn't sit on the tax money, it burns it. The money just disappears into a black hole.

And it can invent money from the same black hole, but they don't have to balance. The money spent and money taken in are completely independent. That's the joy of running your own currency.

The downside of running your own currency is that it will inflate. So you have to take some out of the system. Which you can do in any number of ways, but the most obvious is taxation: you take money and burn it. Not the physical notes, obviously, but rather the line in an account book somewhere.

We've actually been doing something a lot like that for a long time. The US government hasn't had balanced books in forever, and consumer inflation during most of that time has been low. It may be doing messed up stuff to the asset markets and may be reaching its limits, but MMT prescribes a smooth slowing of the market rather than a crash.

Some economists suggest just doing away with the fig leaf and stop trying to balance the budget, but rather just keep an eye on inflation and set policy (both tax and spend) accordingly. That's considered a fringe movement at the moment, but even mainstream economists will say that it's not as far removed from reality as you'd expect from a comparison to a non-currency-making entity like a person or business.

coralreef 2021-08-19 15:59:49 +0000 UTC [ - ]

No it's not a thesis, it's how modern government (and accounting) works.

Back in the day when money was a hard asset that could not be easily created (copper, silver, gold), you paid your coin dues to the regional king, and in turn he paid for security/services over the land. That was taxation.

We eventually stored our precious metal in banks, and traded paper coupons representing those metals. We formed governments, who decided one day to revoke the ability for people to redeem their paper coupons for their gold. Now we still had to pay taxes with paper money, but it was no longer attached to gold's value.

The government/central bank now had the ability to create money at will, and does not physically need to rely on tax dollars coming in: it can create the money, pay for services, and collect taxes later. If it spends more than it collects, it has a deficit. This deficit can be funded by creating new money (in turn devaluing it, aka inflation), or by borrowing money that already exists (raising money through bonds).

So every year, when you wire your tax money to the government, bits of data are simply written to a database, indicating money removed from your account. There is no physical transfer of assets to the government; remember, the money that was paper is now digital. Money is numbers in a database.

Management of money at the macro level is now just balancing accounting inflows and outflows, surplus and deficit. Debt can be infinitely be paid off (create more money) at the consequence of devaluation of course.

Turing_Machine 2021-08-19 16:50:16 +0000 UTC [ - ]

> So every year, when you wire your tax money to the government, bits of data are simply written to a database, indicating money removed from your account. There is no physical transfer of assets to the government

But there is.The government uses the tax money (plus extra money that they create out of nothing) to buy goods and services. Lots of them. Physical assets such as roads. F-35 fighters. Aircraft carriers. Schools. Services such as file clerks. Accountants. Public health doctors.

All of those things represent increased demand, which in turn result in net price increases (i.e., inflation). The money goes right back into circulation, rather than being removed from it, as you claim.

coralreef 2021-08-19 17:09:48 +0000 UTC [ - ]

Yes, the value replacement is there. And yes, tax dollars help "pay" for services.

What I mean by "physical transfer" is literally that if you mailed a brick of cash to the federal government, they would just burn it.

Taxation = money out of the system Money printing = money into the system

The difference causes inflation or deflation.

barrkel 2021-08-19 15:11:49 +0000 UTC [ - ]

People would move their income streams into non-$ denominations, keep their bank accounts in foreign currencies and so on to avoid the inflationary effect.

Further, it would be a regressive tax, not even flat, in practice: poor people are more reliant on cash and short term income which can't be diverted to a different currency. And even if high income people couldn't switch currency, flat taxes are already regressive on a marginal utility basis. Every extra dollar of income or wealth has less utility, because you no longer need to cover essentials like shelter and food, but are spending on entertainment, higher and higher quality, or Veblen goods, etc.

bluedevil2k 2021-08-19 14:47:09 +0000 UTC [ - ]

Printing the money would create uncertainty - how much will the government print? How much will inflation be? How will the dollar fluctuate against currencies of trading partners? Uncertainty kills business and this plan would hurt every aspect of trade and manufacturing.

adolph 2021-08-19 15:26:38 +0000 UTC [ - ]

How is that hypothetical different from what exists now?

bluedevil2k 2021-08-19 15:43:38 +0000 UTC [ - ]

The Fed has a 2% inflation target (used to be their only stated target, now they balance unemployment in their target numbers as well). This allows companies to plan ahead knowing with a fair degree of accuracy the expected change in purchasing power year to year.

adolph 2021-08-19 15:51:57 +0000 UTC [ - ]

That sounds like the answer to your own question, no?

The root comment proposes that "They just create the money they need, the never-to-be-paid-off deficit grows, the value of the dollar shrinks, and we move on." How is that incompatible with an inflation target that "allows companies to plan ahead?"

bluedevil2k 2021-08-19 16:15:49 +0000 UTC [ - ]

No, not at all. How much will they print? 23% of GDP? 18% of GDP? That’s $1T difference in cash. How will that affect inflation? Who knows, no one can predict that. A shrinking dollar is bad for imports and America has a huge trade deficit right now, it would cripple international trade.

opwieurposiu 2021-08-19 14:49:22 +0000 UTC [ - ]

The feds could be funded by inflation as you describe, in fact they already are to a large extent. State and local govs that do not print money should be funded by land value tax, as it is the least bad option.

https://en.wikipedia.org/wiki/Land_value_tax

ibejoeb 2021-08-19 14:49:10 +0000 UTC [ - ]

You just need to account for jurisdictional apportionment. Only the fed can print money. How does that get allocated? Sales tax and property taxes, which presumably would continue to exist in under this scheme, would do some I suppose. Would there still be jurisdictional income taxes?

bwb 2021-08-19 14:52:25 +0000 UTC [ - ]

Taxes create civilization and they power most of the things we love about society... roads, infrastructure, retirement, keeping the environment protected, keeping food safe, keeping restaurants from giving us all rat poop, etc etc... the list is very long. I never understood people who don't like taxes. I totally get not liking how much they are or where the spending is going, but they literally are civilization.

To your 2nd point, money is psychological, that model might happen one day but right now that is not something lenders can get behind. Although you could argue MMT and the current system is headed that way. Taxes are also psychological to help you feel like you are part of the system, and not outside of it.

ezekg 2021-08-19 15:09:04 +0000 UTC [ - ]

> Taxes create civilization and they power most of the things we love about society... roads, infrastructure, retirement, keeping the environment protected, keeping food safe, keeping restaurants from giving us all rat poop, etc etc...

If those things are important, citizens would fund these with or without government coercion through violence. Keeping food and restaurants safe is a function of a free market -- nobody would buy from a business that routinely tries to poison their patrons. These arguments are old and they don't hold up.

saas_sam 2021-08-19 15:15:37 +0000 UTC [ - ]

I don't think you read his post very closely. His first point was that the government has the ability to print money to pay for what it needs which is effectively "taxing" everyone equally across the board (which we feel as inflation).

zionic 2021-08-19 15:06:24 +0000 UTC [ - ]

This is reversing cause and effect. The population creates a civilization that creates wealth for the government to tax.

pg5 2021-08-19 14:41:43 +0000 UTC [ - ]

Do you mean removing income tax or also sales tax, property tax, etc?

artonge 2021-08-19 14:47:54 +0000 UTC [ - ]

I would argue that wealth distribution is also a good reason to have taxes.

CountDrewku 2021-08-19 14:50:05 +0000 UTC [ - ]

Then why isn't it working right now?

frockington1 2021-08-19 14:58:44 +0000 UTC [ - ]

If you look backwards to when the income tax was first started it is working

twiddling 2021-08-19 14:42:21 +0000 UTC [ - ]

How do you fund the framework that secures your rights?

logicalmonster 2021-08-19 14:49:44 +0000 UTC [ - ]

For what it's worth, the US income tax system as we know it was created in 1913.

The US managed to fund a military, roads, bridges, schools, hospitals, and other good stuff before that year, right?

dragonwriter 2021-08-19 16:56:46 +0000 UTC [ - ]

> The US managed to fund a military, roads, bridges, schools, hospitals, and other good stuff before that year, right?

Mostly, no, the United States did not. The states did some (less than they alone, ignoring the feds, do now), the US did a little (far less than now, and funded by extensive use of simultaneously regressive and contractionary tariffs and excise taxes) at normal times and when it scaled up imposed special taxes for the purpose (including, starting in the Civil War, income taxes.) For the military part specifically, prior to WWI (and, to—IIRC—a lesser extent between WWI and WWII), the US had (especially aside from the Navy) very little standing military, relying on expanding out from a small cadre via conscription and rushed training in crises.

thehappypm 2021-08-19 15:28:13 +0000 UTC [ - ]

Back then we had a LOT more tariffs. Free trade is a new thing. Tariffs are taxes too, just way more regressive since they raise the prices of almost everything.

zionic 2021-08-19 15:13:56 +0000 UTC [ - ]

Indeed, yet it holds these concepts hostage whenever someone suggests we eliminate entire classes of taxes.

The truth is the tax system has two primary objectives:

1) to prevent upper middle class from the type of long term wealth accumulation that allows the plebs to enter (and challenge) the elite

2) To fund a hyper scale bureaucracy that constantly seeks the lower bound on the efficiency curve

adolph 2021-08-19 15:28:26 +0000 UTC [ - ]

To be clear, a large component of the "hyper scale bureaucracy" is nominally privatized within the military industrial complex.

zionic 2021-08-19 15:10:54 +0000 UTC [ - ]

How are those concepts related? Currently I fund, under threat of armed men coming to my house to arrest me, a framework that largely aims to undermine, regulate, and eliminate my rights.

The states unconditional right to your labor has no mechanism to encourage preservation of rights.

fighterpilot 2021-08-19 14:43:58 +0000 UTC [ - ]

> How do you fund

From the GP...

> The government takes some of that value by simply creating more dollars.

riffraff 2021-08-19 14:46:42 +0000 UTC [ - ]

which have no value, because the value they have derives largely from the ability to pay taxes with them.

OP's comment makes no sense.

fighterpilot 2021-08-19 14:50:26 +0000 UTC [ - ]

Why does the value of a currency derive largely from the existence of income taxes?

c22 2021-08-19 15:00:41 +0000 UTC [ - ]

Because they induce a demand that might otherwise be satisfied by a different currency.

fighterpilot 2021-08-19 15:07:32 +0000 UTC [ - ]

The low inflation in the US before income taxes were introduced falsifies the argument, no? No other currency was widespread in the US prior to income taxes. I still don't actually understand the argument, to be frank.

c22 2021-08-19 15:16:09 +0000 UTC [ - ]

The US used to exchange gold for dollars which gave them inherent value.

That is no longer the policy and other currently existing currencies do posses the potential to compete with USD. Why would I choose to settle my debts in a rapidly-inflating currency that is backed by nothing?

fighterpilot 2021-08-19 15:33:03 +0000 UTC [ - ]

Well, I agree that the combination of printing money with no taxation isn't going to work due to inflation.

I just didn't understand the statement that a currency's value "derives largely from the ability to pay [income] taxes with them". That statement by itself is historically false, as the gold-backed currency shows. It still makes no sense to me even without gold-backing. As long as the money supply is kept relatively stable, all you need is for a few government services to operate exclusively in USD (e.g. welfare, where funds are raised via land tax or carbon tax for example), and for a reasonable amount of trust in the government, and to perhaps kickstart the group delusion of trust with initial gold-backing, and you're all set. I can make sense of the statement strictly in the context of money printing, where you need the offsetting deflationary impact from taxation (not necessarily income taxation), but that meaning wasn't so clear from the original statement that I was responding to.

blitzar 2021-08-19 15:21:10 +0000 UTC [ - ]

Government debt; so long as that exists then the value of the currency will be derived from the ability to fund that debt through raising revenue - i.e. taxation. Without governement debt, different story.

colinmhayes 2021-08-19 14:41:25 +0000 UTC [ - ]

This is a shit take. Please refrain from commenting on things you are clueless about. I don't have time to explain macroeconomics to you, although I'd encourage you to study yourself. Suffice to say the government can not, and does not pay for itself by endlessly expanding the money supply. That is one tool it has, but if overused causes severe inflationary problems. One of the US's biggest strengths is the reliability of its currency to inflate at 2-3% a year.

platz 2021-08-19 14:56:05 +0000 UTC [ - ]

Tax is the moral basis on which democracy is predicated https://www.youtube.com/watch?v=8Qsl6QUlWVc

adolph 2021-08-19 15:30:22 +0000 UTC [ - ]

Prior to the mid 20th century, a poll tax was implemented in some U.S. state and local jurisdictions and paying it was a requirement before one could exercise one's right to vote. After this right was extended to all races by the Fifteenth Amendment to the Constitution, many Southern states enacted poll taxes as a means of excluding African-American voters, most of whom were poor and unable to pay a tax.

https://en.wikipedia.org/wiki/Poll_tax

clipradiowallet 2021-08-19 15:03:32 +0000 UTC [ - ]

To be slightly pedantic, the US system of government is a federal republic[1] that includes some democratic concepts. An example of those concepts is the democratic election of representatives at a state and federal level.

[1] https://en.wikipedia.org/wiki/Federal_government_of_the_Unit...

zionic 2021-08-19 15:08:41 +0000 UTC [ - ]

That makes perfect sense because taxation is theft and immoral.

It is therefore consistent that the moral basis for our unjust society is itself unjust.

988747 2021-08-19 14:40:48 +0000 UTC [ - ]

The point of income tax isn't revenue - that comes from printing money, or from corporate taxes.

Income tax is basically a surveillance tool - it forces you to declare all your income sources, and a large part of spending (if you want to claim some tax breaks).

pydry 2021-08-19 14:35:43 +0000 UTC [ - ]

Title is misleading. Article is about federal income taxes not all income taxes.

dehrmann 2021-08-19 16:56:54 +0000 UTC [ - ]

Since it said "Americans," I assumed it was at the federal level.

TheCoelacanth 2021-08-19 14:51:33 +0000 UTC [ - ]

And even saying "federal income taxes" is misleading because FICA are federal income taxes paid by everyone who earns wages.

duxup 2021-08-19 14:46:17 +0000 UTC [ - ]

Federal income taxes aren't the only tax tho.

Even with an accurate tittle, I think the whole story is based on a rando stat without much context...

Taxes is such a big topic and here we are where everyone is going to talk about that topic, when the story really only informs (a little...) about a small piece of it.

Meta: I feel like HN has rapidly turned a corner where the title is driving clicks and up-votes and the content of the article is not. To some extent that is always the problem but the scale seems to be moving rapidly :(

matthewbauer 2021-08-19 14:56:53 +0000 UTC [ - ]

I wonder what % of people don't file taxes. And what % of those, are owed a refund? That would skew these stats a lot if people aren't claiming what they're owed.

at_a_remove 2021-08-19 14:36:13 +0000 UTC [ - ]

Meanwhile, I still haven't gotten my tax refund for 2020. Mind you, I am in no hurry, it isn't like I am desperate for that amount. Aside from a very slight anxiety that my paperwork (and it was paper) got lost, getting last year's refund in the month of December (yes, the last one of the year) was an interesting if small indicator of just how poorly the federal government was doing at the time.

ezfe 2021-08-19 15:10:51 +0000 UTC [ - ]

I didn't receive my 2021 tax refund for a few weeks and gave them a call. It turned out that something had gotten stuck and they pushed it through. Got it a week later.

The paper returns were taking forever last year due to COVID, but I filed my 2020 refund by paper and got that last summer as well. If you haven't already, call them and figure out what happened.

nradov 2021-08-19 14:58:53 +0000 UTC [ - ]

https://www.irs.gov/refunds

Check your refund status. If you haven't received it yet then you might be a victim of tax fraud. Or the IRS is reviewing your return for possible audit.

at_a_remove 2021-08-19 15:11:58 +0000 UTC [ - ]

I check that weekly, as I did last year. And I would be one of the last people reviewed, my taxes are dead simple and I use TurboTax anyway because I am a coward.

My guess is that it will be late again.

OldHand2018 2021-08-19 15:58:49 +0000 UTC [ - ]

Are you expecting a paper check?

Have you checked your tax transcript? When you go to that page on your IRS account, you get 4 boxes to choose from. 2020 should be in all boxes by now. I think it is the top left one, but once that is populated your refund has been put in the queue.

My data showed up there about a week and a half ago, and I got the direct deposit yesterday (with interest). A coworker had his data show up at the same time but he is still waiting on the paper check.

at_a_remove 2021-08-19 16:38:21 +0000 UTC [ - ]

Ah, I don't have an account. It'll show when it shows ... I am pretty relaxed about it. It's just interesting to me to see the delay.

bwb 2021-08-19 14:35:52 +0000 UTC [ - ]

Does this count payroll taxes? Very confused how this is possible if they accurately count payroll taxes.

wjossey 2021-08-19 14:39:05 +0000 UTC [ - ]

It does not include payroll taxes.

bwb 2021-08-19 14:47:21 +0000 UTC [ - ]

See, why does this stat even matter without payroll taxes. Payroll taxes go to federal and state.

I hate articles like this.

refurb 2021-08-19 15:26:23 +0000 UTC [ - ]

I mean the title is explicit “income taxes”?

pc86 2021-08-19 14:44:10 +0000 UTC [ - ]

Payroll taxes are federal income taxes.

bwb 2021-08-19 14:48:11 +0000 UTC [ - ]

And state, but if this article isn't counting these it is a wildly inaccurate bit of "journalism"

Spivak 2021-08-19 14:35:21 +0000 UTC [ - ]

This article is doing some really funny accounting. Like I get it but it's also conflating two things that most people probably don't.

The headline should be: 61% of Americans have a federal income tax burden which is less than $1800 and so with the federal stimulus program they are net positive from Uncle Sam (kinda, assuming you only pay income tax and nothing else).

whoomp12342 2021-08-19 14:35:55 +0000 UTC [ - ]

how is that possible with tax being pulled out of paychecks?

wjossey 2021-08-19 14:40:33 +0000 UTC [ - ]

Because you get a refund for taxes paid which you didn’t owe. You pay an estimate over the course of the year based on how much your employer thinks you’ll make, then they (the IRS) refund you the difference if you make too little, or have sufficient deductions to further lower your tax bill.

Jtsummers 2021-08-19 14:43:26 +0000 UTC [ - ]

At least two ways:

1. Refunds if you were overtaxed during the year. For instance, someone making $100k/year but was laid off in March or April when COVID closures started hitting may have had a large amount withheld that was refunded if they remained unemployed the rest of the year.

2. Your income is sufficiently low. If your income is below a certain threshold (or you just claim a lot of credits on your W-4) then nothing will be withheld. Common with minimum wage part-time jobs.

daveslash 2021-08-19 14:47:21 +0000 UTC [ - ]

Part of the article's point was that so fewer people even got paychecks in 2020. That, and pandemic relief in the form of tax credits, which reduced people's tax liability.

But also keep in mind: not everyone who has income gets it from a paycheck; plenty of self-employed or small business people don't get paychecks; when they're paid, it's up to them to put money aside all year to pay taxes at tax time.

2021-08-19 14:44:01 +0000 UTC [ - ]

chrisseaton 2021-08-19 14:46:03 +0000 UTC [ - ]

> how is that possible

Doesn't the US have a 0% tax bracket?

And even if it didn't, whatever% of $0 income is $0.

TheCoelacanth 2021-08-19 14:53:39 +0000 UTC [ - ]

It's not. They aren't counting payroll taxes as federal income taxes.

2021-08-19 14:42:27 +0000 UTC [ - ]

creddit 2021-08-19 14:32:53 +0000 UTC [ - ]

The 1% is so evil, they’re now the 61% and paying no taxes still!

dpeck 2021-08-19 14:30:19 +0000 UTC [ - ]

Compared to what percentage in 2019? More clickbait headlines without context.

Yes, the answer is in the article, it’s up 38%.

HumblyTossed 2021-08-19 14:32:30 +0000 UTC [ - ]

> The pandemic and federal stimulus led to a huge spike in the number of Americans who either owed no federal income tax or received tax credits from the government. According to the Urban-Brookings Tax Policy Center, 107 million households owed no income taxes in 2020, up from 76 million — or 44% of all taxpayers — in 2019.

c22 2021-08-19 14:47:52 +0000 UTC [ - ]

It is disturbing that there are enough people making just above what the IRS considers the poverty line that a couple thousand dollars of tax stimulus should have such a profound effect.

jeffbee 2021-08-19 14:53:05 +0000 UTC [ - ]

A federal check for a couple thousand bucks has been life-altering for millions. American poverty is real.

phdelightful 2021-08-19 14:31:31 +0000 UTC [ - ]

"up from 76 million — or 44% of all taxpayers — in 2019." - TFA

2021-08-19 14:31:54 +0000 UTC [ - ]

2021-08-19 14:32:09 +0000 UTC [ - ]

2021-08-19 14:32:45 +0000 UTC [ - ]

bingohbangoh 2021-08-19 14:34:53 +0000 UTC [ - ]

"But our tax system is inherently regressive!!1"

Never understood how people can say that with a straight face knowing that more than _half of all Americans don't pay taxes_.

adgjlsfhk1 2021-08-19 14:39:59 +0000 UTC [ - ]

It's regressive because pretty much every tax other than income tax is regressive. the 61% that didn't pay income taxes spend all the money they make, so they pay a much higher percentage of their income on sales tax, property tax (through rent), social security, gas taxes, tolls and stuff like that.

Aunche 2021-08-19 15:47:37 +0000 UTC [ - ]

They're only regressive if you're not considering what people are getting out of their taxes. Gas taxes pay for highways. Social security taxes pay for your retirement. The US has one of the most progressive tax systems in the world. The only benefit we seem to get out of it is that the poor and middle class end up spending more money on consumer goods.

In the US, property taxes are so low such that they are uncorrelated with rent. The properties with the lowest tax rates thanks to Prop 13 also have some of the highest rents.

adgjlsfhk1 2021-08-19 14:46:47 +0000 UTC [ - ]

Also having capitol gains taxed at a lower rate than income is regressive. Rich people aren't rich because they work. They're rich because they have money to invest. Our tax system should benefit people who work for a living over people that just pay other people to turn their money into more money.

standardUser 2021-08-19 14:45:00 +0000 UTC [ - ]

Payroll taxes and sales taxes are regressive. Taxes on income earned from possessing wealth are vastly lower than taxes on income from doing work.

zionic 2021-08-19 15:19:34 +0000 UTC [ - ]

A just tax would be a consumption tax.

Rich people consume more, so it makes sense and is fair to pay more to a society you consume more from.

If you make a lot of money and live frugally why should you pay more?

standardUser 2021-08-19 15:38:02 +0000 UTC [ - ]

"A just tax would be a consumption tax."

I don't want a just tax I want a tax system that is effective. When vast amounts of wealth continually become concentrated in the hands of a tiny amount of people, the only effective tax regime is one that extracts wealth from the people who have all the wealth.

thehappypm 2021-08-19 15:30:09 +0000 UTC [ - ]

No, that's not really fair. Someone poor might spend all their income on consumption to stay alive. Someone rich is going to save a lot of their income. Effective tax rates would be higher the poorer you are.

The-Bus 2021-08-19 15:06:47 +0000 UTC [ - ]

> more than _half of all Americans don't pay taxes_

I think the only Americans without a real tax burden are children. Even someone destitute who spends $5 on a fast food meal may pay taxes on it.

Taxation is a complex topic, and reducing it to statements like CNBC's headline is not very helpful.

adolph 2021-08-19 15:35:43 +0000 UTC [ - ]

Children are taxed through their parents much as renters pay the property taxes of property owners. The difference is that children are taxed without representation since the vote is withheld from them and their stewards.

Spivak 2021-08-19 14:40:15 +0000 UTC [ - ]

Nobody is saying that. Income tax is progressive -- some say not progressive enough but still progressive. Sales tax is regressive.

Saying "half of all Americans don't pay taxes" is just wrong. The statement is "half of Americans don't owe any federal income tax". We all pay different taxes like sales tax, property tax (either directly or via rent), payroll tax, capital gains tax, state taxes, local taxes, etc, etc.

colinmhayes 2021-08-19 14:43:25 +0000 UTC [ - ]

All of those other taxes, other than some state taxes, are regressive.

InTheArena 2021-08-19 15:26:13 +0000 UTC [ - ]

This is a big reason we have two Americas. It's well past time to ditch this, and just move to a consumption based tax everywhere. The current system is just a tool for the parties to target money at their own constinuencies, and is almost impossible to manage or stay compliant with. The poor don't pay it a all while the hyper rich can afford the tricks and lawyers to not pay it.

The only ones who pay income tax are the middle class and the lower upper class (IE, not the 1%).