Ken’s Take: I’ve been railing for awhile on the trend to have a minority of voters incur the full burden of taxes. I think everybody should have some skin in the game.
So, who is paying for the bailout? Read on …
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Excerpted from RealClearPolitics.com: “The Bailout and the Vanishing Taxpayer”, October 08, 2008
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We have heard much in the press lately about the American taxpayer being forced to rescue the sharpies on Wall Street from their own greed and irresponsibility. Anti-bailout sentiment cuts “across class lines” on Main Street because “the taxpayers are on the hook for the bad judgment of others,” as the Washington Post put it.
Now for a reality check. Many Americans probably won’t pay a cent of the cost of this bailout.
That’s because a rapidly increasing percentage of U.S. households legally pay no income taxes, and many others pay so little in taxes that they already get back more from the federal government in services than they send to Washington. The number of taxpayers … is small and shrinking, which is why the only way that the folks on Main Street will pay for this bailout will be if Main Street is where the mansions are in your town.
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The declining portion of households who pay taxes is a direct result of policies pursued by both Republicans and Democrats over the last 15 years or so. While deductions and credits have always served to eliminate the tax bill for some low and lower-middle income workers, from 1950 through roughly 1990, the percentage of households with no income tax burden stood constant at slightly more than one-fifth of all filers, according to the Tax Foundation. But since 1990, Washington has added all sorts of tax credits��”subsidizing everything from “lifetime learning” to adoption expenses–that have further reduced the tax tab, and in the process raised the proportion of households with no federal tax liability to 33 percent.
A big culprit in this evolution is the current Bush administration and its tax packages. Although the 2001 and 2003 tax cuts are often criticized as having favored the rich, in fact they were also laden with tax credits benefiting low and middle income families, and as a result, under Bush, the percent of families not paying taxes increased more than under any other president during the last 50 years.
Both presidential candidates would vastly accelerate the trend (from 33% to the mid 40%s).
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In the end, how we actually pay for the bailout is just part of the issue. The larger point is that if McCain or Obama follow through with their tax plans, we’ll continue a trend that makes us look more and more like some European social welfare state, where many people have a stake in growing government entitlements, which fewer and fewer taxpayers finance. At some point along that road, change becomes impossible because too many citizens benefit from the system in place, while those who pay the freight for this system try whatever they can, including starting businesses elsewhere, or reducing their output, to avoid the disproportionate tax bite.
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Full article:
http://www.realclearmarkets.com/articles/2008/10/the_bailout_and_the_vanishing.html
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