Strengthening Constitutional Self-Government

No Left Turns

Is Main Street Really "Bailing Out" Wall Street (or anybody, for that matter)?

Steven Malanga writes a must-read piece on the reality of who pays what in our convoluted tax system today. All the shrieks of outrage from politicians eager to exploit the disgust of voters for the excesses of Wall Street neglect the following fact: "Many Americans probably won’t pay a cent of the cost of this bailout. That’s because a rapidly increasing percentage of U.S. households legally pay no income taxes, and many others pay so little in taxes that they already get back more from the federal government in services than they send to Washington." As Malanga says, if you want to see who is really paying for the bailout (and most everything else) you need to drive through the area where the mansions are in your town.

While this information ought to cause some number of pitchforks to be lowered, it also ought to cause some deep questioning of our tax policies--to say nothing of our spending. Malanga notes, "Of the 138 million households who file tax returns, only about 16 million, or 11 percent, earn enough to pay more to the feds in taxes than they get back in services."

Neither Barack Obama nor John McCain are promising any kind of tax reform that seeks to reverse this trend. Indeed, according to Malanga, Obama would increase the number of households not paying any federal income tax to 44% while McCain’s plan comes in at just one percentage point lower. As we move ever closer toward a situation where more and more people have a "stake in growing government entitlements" and fewer people contribute to the financing of these entitlements, at what point do those paying the freight begin to ask, "Since when did it become just for me to work while you eat?" They will, trust me, find ways around such a disproportionate tax system . . . none of which will be of benefit to those of us most in need of their best efforts.

Malanga sums it nicely: "That’s a prescription for a static economy largely bereft of opportunity. On the other hand, we probably won’t have to worry about volatile markets in such a world." Indeed. Welcome to the stability of stagnation.

Discussions - 7 Comments

Good points, Julie.

Julie, this is interesting information. My questions are ...1) what percentage do the people in the top tax brackets pay? 2) How do these rates compare to rates in other nations? 3) Should we raise income taxes for the lower brackets, and thereby spread the burdens of citizenship more fairly?

I listened to a speech by Barack Obama this morning and he sounded EXACTLY live Benito Mussolini in 1922 outlining his agenda for a fascist Italy.

I even felt led to look up their birthdays. Mussolini, a Leo born July 29; Obama, a Leo born August 4. Leo, a dictatorial energy.

I believe we would not have to worry about a leftist fascist dictatorship if we understood Jesus Christ's view of taxation. See:

Bad points Julie (or rather erroneous).

While it is true that most filers end up paying little on FICA, they are taxed in a myriad of other ways (sales tax, Medicare/aid, SS, gas tax, corporate taxes that are obviously passed on to the consumer, etc.).

Also this "get back in services" is also a dead end. Taxes are taxes. Things you "get back" through the point of the sword (you have no freedom to give, and little to receive) are not exactly "goods and services".

In other words, while I appreciate it on one level (this line of argument is common on the right) it is simply rhetoric - and not going to convince those who have deeper predisposition to socialism in the first place...

While it is true that most filers end up paying little on FICA, they are taxed in a myriad of other ways (sales tax, Medicare/aid, SS, gas tax, corporate taxes that are obviously passed on to the consumer, etc.).

None of which will pay for the bailout. What was your point?

None of which will pay for the bailout.

Baloney - it all goes into the same pot. What's your point? That the "lock box" (or rather multiple versions of them) is real (or should be)?

My point is that "a rapidly increasing percentage of U.S. households legally pay no income taxes" is so untrue as to be laughable - or, rather a piece of rhetoric that conservatives use to try to explain to the ignorant that most folks lose between 40-50% of their wealth to the government. This is true even if their FICA line item gets returned to them...


What are you talking about when you say most people don't pay FICA? FICA > income tax. Although the EITC eliminates FICA for single people with no kids EITC stops at around $11,000. FICA is bigger than income tax (if you suppose the employer portion of it just represents lost wages) until you get to about $50 k I bet. Furthermore while the SS portion of FICA stops at 95 or so, the Medicare portion (2.3%) goes forever.

America either has to cut spending or raise taxes, this selling of debt to China is crazy. While the Feds bailed out Fannie and Freddie in part to save the markets, they HAD to bail them out because China has Fannie/Freddie bonds. If Fannie/Freddie went bankrupt China would not get anything on their bonds, which means they'd be less inclined to buy in the future. Since the Fed Govt is basically financed by China they had to do. Either cut spending or raise taxes, but we have to stop this with China because they're making our policies get too out of whack.

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