[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.

You peeps ever thought of broadening your horizons? I guess that is a silly question since you obviously know it all.

TerriDoddle, you have no idea who I am or what I do or what socio-economic class I am considered to be in. I will tell you one thing, although it is none of your business, you are quite wrong about me.

And I have a niece who works for a company that sounds much like yours. She's a little more honest about her company, its' profits, its' goals and the public relations behind the way they so nicely treat "their" landowners. (It really isn't all about how much they love them.)

You peeps ever thought of broadening your horizons?

Do you?

I guess that is a silly question since you obviously know it all.

What is it about you that, when faced with facts or, worse yet, an opinion that differs from yours, you resort to such infantile tactics? Maybe you should stay off debate-style threads because you most certainly can't keep up.

People can disagree without being disagreeable. I had hoped you could be one of them.

I learned some time ago that she is not.

BJean - Your arguments have been so compelling that I concede and I have seen the light!!! I'm 100% converted. Thank you for sharing the depths of your wisdom. I am RE-BORN!!!

Well Jack, thanks for the generous non-wish for a Happy Mother's Day.

I have been overwhelmed by the amount of right wing data and declarations of knowledgeable insight offered up by a handful of you posters. If I have allowed it to get under my skin, my sincere apologies. I just can't manage to be quite as magnanimous as you charming Republicans, especially under the circumstances in which I find myself at LBT.

You obviously cannot and do not intend to understand my way of thinking about this topic (as well as several other topics) and I admit that I am totally confounded by yours.

You say you would like for me to spend the time to give you links and quotes to explain why I believe the way I do on several topics. However, I do not believe that any of you are open to seriously considering opposing literature or even willing to spend your time reading it, so I certainly do not believe that it would make any sense for me to oblige.

So here we are. You have your political outlook, I have mine and looks like never the twain shall meet.

Interestingly, one of you suggested that I won't be happy in 15 years after going through this shake down, of sorts. But I assure you that I will happily give 15 years to the cause that this administration is undertaking in order to straighten out the mess that the people you support have put us in.

And I was also asked (tongue in cheek I reckon) how we're going to pay off the debt. Well, tongue not so firmly implanted, we'll pay it off the same way we will pay off the astronomical debt of the Iraq war and the Bush administration debacle.

Oh I almost forgot. Happy Mother's Day to all you mo-fo's out there.

Oh and Jack, I am sorry that you are a man without a party. That well and truly sucks

Maybe one day the Republicans will find out that extreme right wing conservative tactics are not supported by the majority of good-hearted, well-intentioned Americans, and they will reorganize and regroup and give us some practical conservative political choices.

re: "give us some practical conservative political choices. "

I certainly hope somebody does. Today's R party is not likely to accomplish such.

Today's R party is the D party of 20 years ago.

What that tells me, Jack, is what I've been saying all along -- and this list proves -- is that this dolt isn't qualified to run a group of Boy Scout much less the United States. The guy is a bigger idiot than Bush was.

Well, what's even worse is that he most certainly WAS aware of all the items on that list....but here we are anyway!!

Did you hear about his latest appointment? Steve Rattner as the "Car Czar? It's sickening:

From The Washington Examiner

Obama’s auto policy: All in the Democratic family

By: TIMOTHY P. CARNEY

Examiner Columnist

05/05/09 8:02 PM EDT

--

President Barack Obama’s auto industry policy promises to heighten the influence of lobbyists and to open the door to ethical transgressions and even outright corruption. By naming as car czar a financier who is also a Democratic fundraiser steeped in cozy business-government relationships, and by replacing the traditional bankruptcy procedures with the will of politicians, Obama has injected Detroit with all the elements of crony capitalism.

Auto czar Steve Rattner, 56, a top Democratic fundraiser, is an old hand at leveraging political influence into profit, as shown by the business dealings of his hedge fund, Quadrangle Group.

One Quadrangle client was New York City’s pension fund — an arrangement at the heart of recent federal convictions for illegal kickbacks. Federal authorities charged that a “senior executive” at Quadrangle — Rattner, according to the Wall Street Journal — met with a consultant who was looking for places to invest the city’s pension fund money. A short time later, the city invested in Quadrangle, and Quadrangle cut a check to the consultant, who has since pleaded guilty to taking illegal kickbacks.

Quadrangle is not under investigation nor has it been accused of wrongdoing in making the payment, but New York’s comptroller is looking into whether the firm failed to disclose the payment.

Rattner, it turns out, is also the personal money manager for New York City’s Republican Mayor Michael Bloomberg.

In Washington, Quadrangle also seems to play politics for profit. Quadrangle paid $160,000 to the K Street firm Navigant Consulting from February 2005 through the end of 2006 to lobby Congress, the White House, and the Department of Labor on a handful of bills regarding asbestos litigation and compensation.

What was Quadrangle’s stake in asbestos legislation? The firm didn’t return a phone call seeking an answer, but it’s not too hard to deduce. Many hedge funds invested in companies damaged by asbestos lawsuits. These funds then lobbied for legislation that would alleviate some of the liability the companies faced, thus boosting companies’ stock value.

Alternatively, a hedge fund could make the opposite play: Watch a vulnerable company’s stock rise as prospects improve for asbestos legislation, then short the company and lobby to kill the bill. Sometimes the lobbyists just acted as intelligence gatherers. A Wall Street Journal article in December 2006 explained the dynamic:

“Some hedge funds, which tend to choose riskier investments that can yield high returns, saw the troubled asbestos companies as attractive. To weigh the value of their investments and decipher bankruptcy-court actions, hedge funds hired teams of analysts and researchers. When Congress began considering legislation to bail out the industry, the funds hired lobbyists to assess its prospects.”

So Rattner understands how public policy can create private profits. It should come as no surprise, then, that his auto plan involves upending bankruptcy law and precedent in favor of a system in which the winners and losers are chosen by politicians or their appointed “czars.”

Rattner and Obama have decided that the United Auto Workers union should get 55 percent of Chrysler. At the same time, they’ve attacked many of Chrysler’s secured creditors — who, in a regular, nonpoliticized bankruptcy, would be repaid in full — for resisting this deal. In a federal complaint, these administration targets alleged: “The government exerted extreme pressure to coerce all of [Chrysler’s] constituencies into accepting a deal which is being done largely for the benefit of unsecured creditors at the expense of senior creditors.”

For the foreseeable future, Chrysler will be on the federal dole, both directly and indirectly. The Obama-Rattner plan puts UAW in charge of Chrysler, which is good news for the Democratic Party.

UAW’s political action committee spent $13.1 million last election cycle, a slow year for the union’s political arm. Of the PAC’s $2.3 million in direct contributions to candidates and candidate PACs, more than 99 percent went to Democrats. Of 42 Senate candidates to get UAW money, only one was Republican, and that was Arlen Specter.

The union’s PAC also reported $4.5 million in independent expenditures supporting Obama, plus an additional $423,000 opposing John McCain.

So, here’s the arrangement: You pay your taxes, the Obama administration funnels some of the money to Chrysler, whose profits enrich the UAW, which in turn funds Obama’s re-election.

Predictability, precedent and the rule of law have been replaced with the fiat of politicians. Chrysler could become a pass-through entity from taxpayers to the Democratic Party. And in charge of it all is a Democratic fundraiser. Boss Tweed would be proud.

Edited May 11, 200917 yr by TerriDoodle

Any bets on how this Chrysler bankruptcy will turn out? The proposal that's on the table is unprecedented and frankly illegal. Will the judge have the balls to do the right thing or will he, too, succumb to Obama's ...uh...."charm".

ALL of these bailouts are illegal! Since when is it deemed legal to steal from Peter to pay Paul? I already knew these people were a bunch of scheisters and crooks, but now they're blatantly doing it!

So, here’s the arrangement: You pay your taxes, the Obama administration funnels some of the money to Chrysler, whose profits enrich the UAW, which in turn funds Obama’s re-election.

Predictability, precedent and the rule of law have been replaced with the fiat of politicians. Chrysler could become a pass-through entity from taxpayers to the Democratic Party. And in charge of it all is a Democratic fundraiser.

It's been so obvious from the beginning that these "bailouts" were nothing but rewards for democratic cronies. And the left bitches and moans about what they thought Bush was doing! This takes it up a notch. Where Bush allegedly gave contracts for the war to his big business buddies, THIS loser is outright stealing our hard-earned money and financially rewarding unions who voted for him.

This guy makes organized crime bosses look like child's play.

This guy makes organized crime bosses look like child's play.

It's becoming obvious that he learned from the "best", Beth.

You all accuse me of going off the deep end? Yeah. Right. There's no discussion on this tread.

It's like some of the threads that turn all religious. There's just no talking to some people. They know it all. They're sure of that because they have all the evidence in print. In religious cases, it's mostly the Bible they cite. With you all, it's all the right wing propaganda that is put out all over the media. You're convinced and there's no slowing down to consider a different viewpoint. You're just as pleasant to exchange ideas with as religious fanatics. Geez louise.