[emphasis added by OP]

The Income Tax System is Broken

43 Percent Of Americans Pay No Federal Income Tax, A Sign That Something's Wrong, Writes Declan McCullagh

April 15, 2009 | by Declan McCullagh

(CBS) On April 15, don't be surprised if the line at your local post office is a bit shorter than usual. That's because your neighbors may not be paying any income taxes this year.

An astonishing 43.4 percent of Americans now pay zero or negative federal income taxes. The number of single or jointly-filing "taxpayers" - the word must be applied sparingly - who pay no taxes or receive government handouts has reached 65.6 million, out of a total of 151 million.

Those numbers come from an analysis published yesterday by the Tax Policy Center, a joint project of the Urban Institute and Brookings Institution. Neither is a low-tax or conservative advocacy group; the Urban Institute was created under the Johnson administration during the Great Society era, and it receives most of its funding from the federal government.

"You've got a larger and larger share of people paying less and less for the services provided by the federal government," says Roberton Williams, a senior fellow at the Tax Policy Center. "The concern is that the majority can say, 'Let's have more benefits, spend more,' if they're not paying for it. It's 'free.' That's not a good thing to have."

By historic standards, today's situation is an aberration. Between 1950 and 1990, the number of owe-no-money federal tax returns averaged 21 percent, dipping to 18 percent in 1986, according to Tax Foundation data. In the 1990s, the owe-no-money percentage hovered around 25 percent of taxpayers.

But then politicians began another round of tinkering with the tax code, adding reams of new pages to an already incomprehensible set of rules that even the guy overseeing the IRS can't seem to figure out.

Democrats wanted to lower taxes on the least affluent, while Republicans wanted to lower taxes on everyone. The result was bipartisan enthusiasm for tax credits aimed at everything from children (1997) and college students (1997) to hybrid cars (2005) and homebuyers (2009). Many of these credits dole out cash to people even if they report no income, making them mere government handouts.

"There's no difference at all in terms of the effects on the federal deficit," says Williams of the Tax Policy Center. "It's perfectly equivalent. It's just easier to say, 'I cut your taxes' as opposed to 'I created a new federal program to send money to people.'"

I'm talking here about federal income taxes, not other taxes like Social Security, Medicare, state income taxes, sales taxes, or car registration taxes, some of which are extracted through payroll deductions. The owe-no-money crowd tends to get hit by at least some of those.

The perils of today's situation should be obvious. The United States is close to a tipping point - where most people can skip the post office run on April 15 to mail a check because they're expecting one from the government instead.

"It is somewhat odd that you have a decreasing number of folks paying into the federal income tax system, a decreasing number of folks who have a stake in what the government pays for," says Matt Moon of the non-partisan Tax Foundation in Washington, D.C.

It then becomes tempting to vote for politicians promising more and more handouts, paid for by money forcibly extracted from an ever-shrinking number of their neighbors. In addition to being immoral, it's poor public policy: people who pay no taxes but nevertheless get benefits are less likely to be careful overseers of their elected representatives.

"At some point people become less and less invested in making sure their government is accountable and frugal," says Peter Sepp, vice president for policy and communications at the National Taxpayers Union, a lower-tax advocacy group. "If you pay very little for getting all kinds of government benefits, you might view those programs as a bargain, even though they may waste tens of billions of dollars a year."

As a candidate, President Obama promised still more tax credits, including ones aimed at child care, "clean cars," and savings accounts. As the Wall Street Journal explained at the time: "You can receive these checks even if you have no income-tax liability. In other words, they are an income transfer - a federal check - from taxpayers to nontaxpayers. Once upon a time we called this 'welfare,' or in George McGovern's 1972 campaign a 'Demogrant.'"

A recession, the stimulus, and innumerable bailouts have placed Mr. Obama's plans on hold. But the expiration of the Bush tax cuts at midnight on December 31, 2010 will renew interest in a tax law rewrite.

That will be an opportunity to gut the current system and replace it with something simpler and fairer. After all, if government is important enough to force most of us to work until April 13 to pay its bills, why shouldn't everyone share the pain?

Declan McCullagh is the chief political correspondent for CNET and a CBS News EconWatch contributor. Previously, he was Wired's Washington bureau chief and a reporter for Time.com and Time magazine in Washington, D.C. He has taught journalism, public policy, and First Amendment law. He is an occasional programmer, avid analog and digital photographer, and lives with his wife in the San Francisco Bay area.

By Delcan McCullagh

© MMIX, CBS Interactive Inc. All Rights Reserved.

These assholes really don't get it, do they? This was FAR from right-wing! There were MANY democrats at our protest!

This is a CITIZEN protest, not a right/left one! Otherwise what they're saying is that the RIGHT are the ones paying taxes, while the LEFT are the mooches sponging off the system. Which we know isn't exactly true.

These assholes really don't get it, do they? This was FAR from right-wing! There were MANY democrats at our protest!

This is a CITIZEN protest, not a right/left one! Otherwise what they're saying is that the RIGHT are the ones paying taxes, while the LEFT are the mooches sponging off the system. Which we know isn't exactly true.

Are you referring to the CNN and MSNBC assholes? Oh, they get it....they just don't care anything about responsible journalism! Hence their ratings. 'Nuf said.

Are you referring to the CNN and MSNBC assholes? Oh, they get it....they just don't care anything about responsible journalism! Hence their ratings. 'Nuf said.

Yeah, I meant them.

Do you really think they get it? I dunno, I think they don't. I think THEY truly think this is a right-wing issue organized by FOX. I've heard that a lot. This was a grass-roots effort by everyday citizens who wore no political affiliation on their sleeve. I saw black, white, brown, yellow... all sorts of people there.

People are in a stranglehold by their government, which is taking more liberties than the Constitution allows them to have -- for the very same reason they fled the tyrrany in Europe. This policy is NOT sustainable in any way, shape, or form.

We had some great speakers at ours, one of whom had lived in the USSR for a time when they played the inflation game, printing money like the US is. A month's wages very quickly got to the point where they wouldn't stretch the week, and then a day. This woman said hundreds of people a day were plunging from buildings to their deaths because they had been wiped out. She and her family literally walked past bodies on the streets on their way to church.

She said this happened in a matter of months due to the same types of things that our government is now doing. The one thing you can say about people in general and government specifically -- they NEVER learn from past failures.

It's f*cking ridiculous, Jack. The whole thing just needs to be tossed....NOW. I am going to throw my energy behind the national sales tax...Americans For Fair Taxation. Something's gotta give.

Sorry, but I believe that every single American should pay income tax unless you are disabled. Even if it is 3% or 5%...I don't care...just something to give you a REASON to monitor your government. If you don't have an investment (especially those who receive welfare benefits on top of that) then what inspires you to keep these bozos in DC accountable?

Eh, I can see not paying tax in Mac's situation (um....by that I mean legally not qualifying), because start up and small business are so vital for our economy.

The thing that's hard for me to swallow is "generational welfare", ie 4 generations of a family being on welfare (like that which was discovered in the wake of Katrina). That's where the system is flawed.

you got that right, plain.

Btw, there are Americans who refuse to pay taxes - period. They do not file, they do not pay, in many cases they are not in jail.

Eventually they may go to jail, but it usually takes a really long time for Uncle Sam to catch up with them. And when he does, it may result in a fine, which the culprit is allowed to pay out on a schedule. So Sammy gets the money, if and when they decide to pay that.

I know that there have been generations on welfare because my Mother worked in a job where she was exposed to it on a daily basis. I did think that there had been some changes made to the system and that it had become much harder to take advantage of welfare over a long period of time. But let's face it, there are dishonest people at the bottom of the barrel and there are crooks at the top bilking the system. Honest people in the middle seem to be hit the hardest.

Do you honestly believe it is fair for you to not pay one single dime in income taxes?

Yep, it's totally fair. I've paid taxes out the ying-yang when I was making six figures and I'll be paying them again this year. The government won't collapse during those two years I was trying to get my business going and even 1% during those years would have been a big burden on us. Heck, we're still trying to get out from under those two years in a lot of ways.

Fair doesn't mean equal. I tell my kids that all the time and I mean it.

re: "Fair doesn't mean equal."

I have been unable to understand what you mean with this statement. Can you provide examples?

My son goes to bed later than my daughter. My daughter says "it's not fair" but it is fair. He's older. When she's older, she'll stay up later too.

It works with income tax too. It wouldn't be fair if Bill Gates and I paid the same tax. It's not really even fair if we pay the same percentage. Because 10% of his income is nothing to him, but to me it's a big portion of my disposable income.

re: "Fair doesn't mean equal."

I have been unable to understand what you mean with this statement. Can you provide examples?

Another example: You are in a room with 20 people and you are the only one who knows CPR. One person has a heart attack and needs CPR. If you give him CPR you are not being "fair" to the other 19 people because they might need it too, but you can't give it to them if you are giving CPR to someone else.

Equal doesn't mean "fair" and "even" it means giving or getting what each individual person NEEDS at that moment.

As for taxes, see the above post. Hypothetically Person A make 30,000 a year, 10% flat tax would be 3,000 leaving 27,000. That is a lot to take away when one makes so little a year and it is hard to make ends meet. Person B makes 300,000 a year, 10% flat tax would be 30,000 leaving 270,000. Same percentage, but there is a lot more money to go around to make ends meet.

10% may not sound like much, but the less you make the more each dollar, dime, and nickel count.

As for the statement 43% pay no taxes, how much do those people make? We are not talking loads of money. What that means is after you take in all your income, deduct all your allowances, you have earned so little money that you don't owe the government any money. The 43% number does not include taxpayers who actually earned a high salary.

Hmmm, which would I rather have? A low income so I don't owe any taxes or a higher income and actually do owe taxes. Let me think....I'd rather have the higher income, then maybe I wouldn't be living paycheck to paycheck.

Jack you seem to be saying that nearly half the people in America get a check from the government. Wha, wha, what?

Just because some people don't make enough money to owe taxes, doesn't mean that they are getting welfare checks. Or am I totally missing the boat on your point this time too?

You and I have a very different way of looking at things and interpreting statistics - well not true statistics, but numbers.

jenaj: good post!

Jack you seem to be saying that nearly half the people in America get a check from the government. Wha, wha, what?

Just because some people don't make enough money to owe taxes, doesn't mean that they are getting welfare checks. Or am I totally missing the boat on your point this time too?

You and I have a very different way of looking at things and interpreting statistics - well not true statistics, but numbers.

jenaj: good post!

They may not all get welfare but they might get a refund check.

They may not all get welfare but they might get a refund check.

Which IS a welfare check. The people just don't know that they're on welfare from other people's money.

A refund check is most definitely NOT a welfare check. It's your own money that you put in coming back to you.

A refund check is most definitely NOT a welfare check. It's your own money that you put in coming back to you.

But if you paid no taxes? Or are you referring to prior years' taxes?

But if you paid no taxes? Or are you referring to prior years' taxes?

I think she means if they deducted $1000 from your pay for the year but you get a $500 refund check. That $500 you have already paid but are being returned for overpayment.