Taxes Blog

Finance Blogs » Taxes » Everyone avoids taxes

Everyone avoids taxes

By Kay Bell · Bankrate.com
Thursday, August 25, 2011
Posted: 11 am ET

When I was a kid, the big government bugaboo was welfare. President Bill Clinton and a Republican Congress revised that system 15 years ago. Since changes to the program, welfare caseloads have dropped by 57 percent nationwide.

But Americans still need someone to blame for their and the country's troubles.  So now it's all about the tax moochers.

You know who I'm talking about. Depending on which study you choose to cite, 46 percent to 51 percent of Americans get away each year without paying taxes.

Of course, a couple of things get lost in all the statistical ranting.

First, these folks aren't escaping all taxes, just income taxes. They still are paying into the Social Security, Medicare and unemployment tax coffers.

And the reasons they aren't paying income taxes are simple.

They either don't make enough money for the Internal Revenue Service to require them to file.

Or they're taking advantage of legal tax breaks to lower and in many cases eliminate their tax liability.

The chief culprit here is the Earned Income Tax Credit, or EITC, which was created 36 years ago to encourage people to get jobs by helping them offset some of the payroll taxes that were eating into their low earnings.

The EITC grew from debates over President Richard Nixon's proposals to establish an alternative to public assistance. Another Republican president, Gerald Ford, signed it into law and President Ronald Reagan called it "the best anti-poverty, the best pro-family, the best job-creation measure to come out of Congress."

But I guess the opinions of those guys don't matter.

Instead, we have politicians and the folks who put and keep them in office railing about how the poor are sponging off the rest of us. Guess what? The rich are picking our tax pockets, too.

Data released earlier this year by the Internal Revenue Service revealed that the percentage of people who reported incomes of at least $200,000 and paid no taxes almost doubled in 2008 from 2007. A note on the tax years: IRS statistics are always a few years behind since it takes a while for folks to file and the agency to slog through it all.

Exactly how did those higher-income earners accomplish this no-tax feat? The same way as their poorer tax brethren. They used our tax system's myriad legitimate tax breaks to wipe out their IRS bills.

So before your start pointing fingers at so-called tax freeloaders, you might want to look in a mirror. I don't know many people at any income level who've refused to take a tax deduction or credit.

And remember when Congress returns next month and starts anew its quest to reduce the federal deficit, it's the ostensible tax-saving actions of most of us that are in some way to blame for just how much Uncle Sam owes.

Don't miss out on any tax news and tips. Subscribe to Bankrate's free Weekly Tax Tip newsletter.

You also can follow me on Twitter at @taxtweet.

«
»
Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.