Americans are subject to up to 55 different types of taxes all the way from a fishing license tax to a telephone usage surcharge tax. Currently, 307,868,280 Americans compose 151,485,000 tax units of which 46.9% will have zero federal income tax liability in 2009. That leaves 80,438,535 to pay over $1 trillion dollars. So who is paying? Well, 10% of the all the taxpayers in the United States pay about 71.2% of that trillion dollar tax bill!
I questioned this percentage and after further investigation found that about 47% of all the households in the United States will pay no federal income tax at all for 2009. Either their incomes were too low, or they qualified for enough credits, deductions and exemptions to eliminate their tax liability. In recent years, credits for low and middle income families have grown so much that a family of four making as much as $50,000 a year will owe no federal income tax as long as there are two children younger than 17 year of age. The result is a tax system that exempts almost half the country from paying for programs that benefit everyone, including national defense, public safety, and education. It is a system in which the top ten percent of earners, households making an average of $366,400 in 2006, paid about 73% of the income taxes collected by the federal government. Basically, we have 50 percent of the people who are getting something for nothing.
Now even the vast majority of people who escape federal income taxes still pay other taxes, including federal payroll taxes that fund Social Security and Medicare, and excise taxes on gasoline, aviation, alcohol and cigarettes. They also pay state or local taxes on sales, income and property taxes.
To make matters worse, only a handful of people in the entire country, including the IRS, understand the Federal Tax Code. The entire tax code is now over 9,097,000 words. The directions for a typical form 1040 totals a mere 161 pages. The “EZ” version is 41 pages. The IRS employed 90,647 people in 2008 with operating costs of $11,207,223,000. If we simplified the code, many of these IRS employees could go into more productive lines of work and billions of dollars in taxpayer money could be saved just by reducing the size of the IRS.
Lobbying is the biggest business in Washington. About $3.2 billion dollars were spent in 2008 on lobbying. The majority of America’s lobbyists are working on increasing the level of complication of the tax code by fighting for special loopholes and regulations that will save their company money. While compliance with the tax code is a multi-billion dollar industry, most accountants agree that if we scrapped the tax code for a simpler one, the sum total benefit could be in the billions of dollars. Then, however, what would the members of the Ways and Means Committee of Congress do with the $55,157,458 dollars they received last year in campaign contributions?