Wall Street Journal: Lucky Duckies: The Non-Taxpaying Class
But as the Republicans construct their tax plan, there is a large and under-appreciated fact they would do well to keep in mind. Over the past decade or so, fewer and fewer Americans have been paying income taxes and still fewer have been paying a significant percentage of income in taxes. While we would opt for a perfect world in which everybody paid far less in taxes, our increasingly two-tiered tax system is undermining the political consensus for cutting taxes at all.
.. Even the barest of glances at tax data reveal a system that is steeply progressive. Tax revenue has been increasingly squeezed out of top earners. According to the most recent data, from 1999, the richest — with income above half a million dollars — constituted 0.5% of taxpayers but accounted for 28% of total tax revenue. Simply put, a tiny group of people (553,380) were responsible for more than one-quarter of the income tax take of $877 billion.
.. Who are these lucky duckies? They are the beneficiaries of tax policies that have expanded the personal exemption and standard deduction and targeted certain voter groups by introducing a welter of tax credits for things like child care and education. When these escape hatches are figured against income, the result is either a zero liability or a liability that represents a tiny percentage of income. The 1986 tax reform, for example, with its giant increase in the personal exemption and standard deduction, took six to seven million people off the tax rolls.
.. And as fewer and fewer people are responsible for paying more and more of all taxes, the constituency for tax cutting, much less for tax reform, is eroding. Workers who pay little or no taxes can hardly be expected to care about tax relief for everybody else. They are also that much more detached from recognizing the costs of government.
All of which suggests that the last thing the White House should do now is come up with more exemptions, deductions and credits that will shrink the tax-paying population even further.