August 15, 2011

Tax Fairness: Little Income, Little to Tax

The Economist:

"But the point that about half of American tax units pay no federal income tax is correct. Why not? Aaron Carroll and Donald Marron point us to a new report by the  Tax Policy Center (a joint project of the Urban Institute and the Brookings Institution), which explains that there are two basic reasons why people don't pay federal income tax: either they're very poor, or they're covered by tax expenditures, mainly the ones that benefit the elderly and children."

A brief, detailed explanation of the fact that less than half of Americans pay federal income tax. The short version: most of them are too poor to require payment. Some few more are freelance workers whose cost of doing business eats up much of their income, and standard tax breaks eliminate taxation on the rest. Give it a read.

New sources of revenue will have to come from somewhere else. Warren Buffett has a good idea of where.