Some Thoughts On The Tax Tipping Point

Peter Kirsanow writes this at NRO:

During the presidential election campaign many were dumbfounded upon hearing for the first time that at least a third of Americans pay no income taxes whatsoever. The Tax Foundation notes that in 2006, 45.6 million filers (33%) paid no income tax whatsoever. Under current law, in 2009 47 million filers—representing approximately 96 million individuals— will pay no income tax. 

 

The Foundation maintains that under Obama's tax plan 63 million filers— representing 44% of all returns— will pay no income tax. In contrast, in 1985, just 16.5% of filers paid no income tax.  

 

It appears Obama wasn't kidding about redistributing the wealth, although he appears to be somewhat late to the game.

 

At the other end of the spectrum, IRS data show that in 2006 the top 10% of all filers ( $109,000 and above in taxable income) paid 71% of all income taxes. The top 25% ( $65,000 and above) paid 86% of all income taxes.

 

Exempting huge swaths of the populace from the income tax burden while piling that burden on a shrinking cohort is a prescription for economic, political and social dysfunction.

 

Eventually, even fans of steeply progressive taxation might be compelled to ask, "Do the top 25%  of filers really access/consume 86% of all government services?" Obviously, the relationship between government and citizen isn't a retail one, but we shouldn't be surprised if the imbalance displayed by the above figures begins to prompt such unvarnished questions around kitchen tables across the country.

 

Sure, many of those who don't pay income taxes still pay excise, payroll, etc. taxes. But income taxes represent the biggest tax bite by far. The anger and resentment at bailing out Wall Street, Detroit, etc. isn't going to be dampened by the belief that nearly half of Americans won't be doing much bailing at all.

This is a great explanation, but I think it stops just short of what will be the eventual tipping point.  When a majority of Americans suddenly become the ones to enjoy the benefits of government handouts without the burden of paying the taxes that provide those handouts, the country will be lost.  When a 51% majority no longer pays taxes, they can vote themselves whatever big-government programs they want (through the big-government politicians that will always be in ready supply), thus sticking it ever harder to the 49% who actually foot the bill.

This, of course, is the beginning of the end.

As the 49% realizes that there is no longer any hope of reducing their overwhelming tax burden, they will leave.  They will close up their businesses, they will retire, they will move offshore, whatever.  But rest assured they will leave, and in big numbers.  When that happens, the tax spigot will suddenly run dry, leaving the 51% with nothing but their own dependency on a government that is literally bankrupt.

This is the problem that our country faces, and one of the biggest dangers presented by the coming years of Obama-Reid-Pelosi leadership.  They have made no secret that they plan to raise as many taxes as possible, and I don't expect them to honor their meager pronouncements of tax reductions.  As Kirsanow related above, we are already looking at about 44% of all Americans not paying any income tax...that's dangerously close to the magic 51%.

It must stop now, before it spins out of control.  Demand accountability from your elected reps, and make it clear to them that you're paying attention.  When they fail, send them home with your votes.  It's a slow process, but it's one that must be done if we are to pull America back from the tax tipping point.

There's my two cents.