When you pay taxes, remember that the bottom 20% of income earners do almost no work. don’t pay taxesand receive government support. The next lowest 20% pay minimum tax but also receive government support.
Considering the credits, the bottom half is effective pay about $667 per year. In contrast, the top 1% of incomes contribute roughly 38.8% of all federal income taxes, and the top 10% pay about 70% of total federal income taxes. Most of the rest is paid by middle-income earners.
Households in the bottom 20% of income often pay little to no federal income taxes due to low taxable income and tax credits such as the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC). According to the Tax Policy Center, this amounts to approx 44% of American households do not pay federal income taxes, largely because of these credits and deductions.
Many low-income households receive transfer payments from government programs such as Medicaid, Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF), and housing assistance.
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). In addition, millions of others benefit from other social safety net programs. For example, in fiscal year 2022, approximately 41.2 million people received SNAP benefits.
It is argued that while low-income households do not contribute significantly to federal income taxes, they do contribute to other forms of taxation, such as payroll taxes, sales taxes, and property taxes on their homes. However, these arguments are easy to refute.
The social security contributions of the low income group are minimal because they earn less money and work less often. Middle and high income groups pay more to social security, with the maximum contribution taking place at a income of $168,000.
In addition, low-income workers can receive Supplemental Security Income (SSI), a needs-based program that provides financial assistance to disabled adults and children with limited income and resources. SSI is not dependent on work history or contributions to Social Security.
The property tax argument fails because the poor are less likely to own homes. Property taxes are used to fund public schools, so people who don’t pay property taxes can still send their children to schools funded by other people’s property taxes under Title I.
A counterargument is that tenants indirectly pay property taxes through their rental payments, which landlords use to cover property taxes. However, in the old tenement system, there was a building owner who paid property taxes.
In the new system of projects and state housing, the government is the owner and no property taxes are paid. Therefore, all funding for local schools must come from other taxpayers in other neighborhoods.
Middle and high income earners contribute significantly to the payroll tax, which funds Social Security and Medicare. Self-employed people pay both the employer and employee portions of these taxes, effectively paying double.
Middle- and high-income earners often own businesses and create jobs, contributing to the economy and creating employment, while also paying the employer portion of payroll taxes. This entrepreneurial activity supports economic growth and can lead to higher tax revenues.
Another cost that taxpayers must bear is crime. Evidence shows that higher crime rates are associated with lower income areas. Property crimes and others criminal activities impose significant costs on taxpayers as a result of law enforcement, judicial processes, and correctional services.
Tackling crime and its social costs involves significant public expenditure. However, people who live in high-crime areas typically pay little or no income tax. As a result, the costs of policing these areas fall on the shoulders of taxpayers in other neighborhoods, diverting money from public services in tax-paying areas to policing non-paying areas.
Research from the Center for Poverty and inequality Research at UC Davis shows that a significant share of children who grow up in poverty and receive public assistance remain dependent on these programs into adulthood.
About a third to a half of children who live in poverty for a substantial part of their childhood remain poor as adults. A study of the National Bureau of Economic Research (NBER) found that receiving benefits by parents significantly increases the chance of their children participating in social assistance. This intergenerational correlation suggests that the use of social services is to some extent a learned behavior, perpetuating the cycle of dependency.
In short, almost the bottom half of the population pays no or very little taxes and/or receives 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 taxpayers to the non-taxpayers.
