A long article in the April 8 Missourian contained a very misleading headline, a headline that perpetuates the commonly held but erroneous belief that many Americans pay no federal taxes. “Getting something for nothing” is the lead for an article that reports that 47 percent of U.S. households in 2009 received incomes insufficient to generate an income-tax liability. The article alleges that our “tax system … exempts almost half the country from paying for programs that benefit everyone, including national defense, public safety, infrastructure and education.”
This is blatantly false; there is no such exemption. Buried deep in the article is the acknowledgment that “the vast majority of people who escape federal income taxes still pay other taxes, including federal payroll taxes that fund Social Security and Medicare ....” Virtually all Americans who work pay payroll taxes, and this money is not used to fund only Social Security and Medicare. For many years, billions of dollars of payroll taxes have been diverted to fund national defense, public safety, infrastructure, education and other government programs that benefit everyone. Most Americans pay more payroll taxes than they do income taxes.
The payroll tax is a regressive tax that disproportionately impacts low- and middle-income families. Payroll taxes only apply to the first $105,000 of income. Thus the person who makes $1 million dollars a year pays the same tax as someone who makes $105,000. The rationale for this is that Social Security benefits are capped; they do not continue to increase with increasing income. However, the use of payroll taxes to support services other than Social Security and Medicare has the effect of shifting the burden of this support to low- and middle-income tax payers.
Contrary to the assertion of the headline, nobody gets “something for nothing” with respect to taxation.