Tax Day -- April 18, 2016 -- Not Ready For Prime Time

Updates

Later, moments after posting the original post, this headline: Dow briefly tops 18,000 for first time since July, 2015.  One can only imagine where the market would be if the likes of COP were doing a bit better. LOL.
 

Original Post

 

Bernie: 13.4%

Michelle and Barack: 19%

So, we're going to get a lot of tax stories today, this week -- tax day today.

This one for example. Marketwatch is reporting that only 45% of Americans pay income taxes.  I don't know if that's good or bad.

Wouldn't it be wonderful if, in 2026, the headline could be: US Economy Expanding, Booming; Only 20% Of Americans Pay Federal Income Tax!

Some random comments, thoughts, knee-jerk reactions.

First of all, the rich are doing pretty well in this country. The market is very close to hitting an all-time high. The really, really rich collect a lot of money off dividends and capital gains and municipal bonds.

Second, to a great extent -- there may be some exceptions in Hong Kong, China, India, Kenya -- the US remains an incredibly good country for entrepreneurs and for "rags to riches" stories.

Third, what a great country! 55% of folks are living the good life of FREEDOM -- if they stop to think about it -- without having to pay any federal income taxes.

No more numbers. I'm running out of fingers.

Just 'cause folks aren't paying taxes, doesn't mean they aren't sending money to Washington, DC. My understanding is that the bulk of federal government spending is for Social Security and Defense. Working folks not paying taxes are paying into social security as are their employers, and that's not trivial. And the tea leaves suggest that social security "taxes" are not going to go down. If anything, they will be increased.

I think the biggest change in "income tax reporting" has to do with ObamaCare. I could be way wrong on this; I've written about this a long, long time ago, but haven't seen any stories in mainstream media to support my thoughts, suggesting I am mistaken. Again, I could be way, way wrong on this. For those who don't pay income taxes, some (many, most?) will be eligible for money from the government due to the earned income tax credit. But, forgetting about those, let's say that 40% of Americans who do not pay taxes have no reason for filing an income tax form, why would they file one. Sure, by law they have to, and the government gets a lot of information on them anyway through other means, the fact that Americans must report to the IRS whether they have a health care plan that meets the ObamaCare mandate means that 100% of Americans must submit data to the US government about their background: their healthcare source; their dependents -- stuff they would not otherwise have to report. I don't know; maybe that doesn't amount to anything. I don't know, but with ObamaCare, everyone has to report to the IRS their healthcare status.

In fact, with regard to ObamaCare -- the Supreme Court ruled that ObamaCare was a tax. Since everyone is required by law to have ObamaCare, it's hard to believe that 45% of Americans pay no taxes.

The US seems to be doing just fine with only 45% of Americans (whether that number is accurate or not, it's probably close) paying federal income taxes.

The federal government may have a reason to encourage a $15-minimum wage: maybe it will push a few more folks into paying federal income taxes (LOL -- I doubt that) but it will definitely bring more money into social security.

Unlike Europe, the US does not have a consumption tax (yet) or a value-added tax (VAT). A lot of folks in Europe are paying a lot in VAT -- something the 45% of Americans who pay federal taxes don't pay.

I don't know. I'm schizoid on this. In the "emotional arena" I don't like the fact that 45% of Americans don't pay federal income tax, but somehow the system seems to work pretty well.

Think of all that money that is being spent at Walmart, Target, at the city, county, and state level that isn't being sent to Washington, DC. They say 1% of Americans account for about 40% of federal revenue -- even if those 45% of Americans not paying federal income tax did pay some tax, it wouldn't amount to a hill of beans. Wouldn't one rather prefer this small amount of money being spent locally and not being sent to Washington? Shoot, wouldn't it be wonderful if the government spent so little and made so much on its assets that 90% of Americans didn't pay federal income tax.

Even if they are not paying federal income tax -- a progressive tax -- all Americans face regressive costs and fees: automobile registration; child care; sales tax; property tax (for the most part; some exceptions); fees and taxes on utility and telecommunications bills. Those fees are increasing, not decreasing.

The most regressive tax paid by all Americans: bad policy decisions. Among the worse: mandated intermittent, unreliable energy. Everyone is paying higher utility costs for naught.

I don't know. I don't know what it means that 45% of Americans don't pay federal income taxes. Is that good or bad? I don't know.