Tags: taxes | 47 | irs | federal

Is Paying Zero Taxes Fair?

By Jeff Katz   |   Monday, 01 Oct 2012 12:38 PM

Much has been written of late about governments' ballooning deficits and excessive spending, as well as resulting tax policy.

Conservatives tend to emphasize the dynamic relationship between tax rates and tax revenues. They note that taxing away half or more of one's next dollar earned will often lead one to decide not to earn that next dollar.

Society then suffers from reduced output, as do the tax coffers which would have been fuller, with increased income more than offsetting lower tax rates.

Editor's Note: Use This Single Loophole to Pay Zero Taxes. See Video

On the other hand, liberals, together with the president, emphasize the need for everyone to pay "their fair share" of the overall tax burden. Sounds right.

The question becomes, then, What is one's "fair share"?

How about zero?

Almost half of American households (about 47 percent) pay no net federal income tax, based on data produced by the Internal Revenue Service.

Many of these folks pay payroll taxes, but those are more like a contract with the government than like a tax, because they're paid in order to earn Social Security payments and Medicare benefits later in life. Some may also pay property taxes on their homes, sales tax on their purchases, and state income or other taxes, depending on the state.

But on the biggest tax, the federal income tax, almost half pay nothing.

Is that fair?

What incentive is there for those only receiving federal benefits, without paying for them, to rein in the size and cost of our government in Washington? Their incentive, conversely, is to keep increasing federal spending and benefits indefinitely, with other people's money.

The only check on this may be the realization that such spending cannot continue forever (see Greece). Like a slothful son who squanders his legacy, one who takes from a pot without paying in will seldom appreciate what it takes to keep the pot full.

Tax revenues are not a static source of funding, to be grabbed and spent in any way fancied, with scant attention to rainy days.

We, as a nation, in order to leave a viable American economy to our children and grandchildren, have a responsibility to stop runaway deficit spending at all levels of government.

A good place to begin is the implementation of policies that promote productivity and work, and not those that foster mentalities of dependency and entitlement. The latter don't work well in the long run, as our friends across the Atlantic will readily attest.

Editor's Note: Use This Single Loophole to Pay Zero Taxes. See Video

If we act in time, severe austerity plans, which many in Europe have had to deal with, are avoidable. But not if we wait much longer to implement sound spending and tax policy.

Is it helpful or fair to push federal tax rates and regulation to the point that entrepreneurs would rather just stay at home? And, for that matter, does demonizing successful business folk who drive our economy really help anyone's agenda?

Jeff Katz is an attorney who comments frequently on economic matters.

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