Tuesday, September 23, 2008

"One of the biggest challenges facing both John McCain and Barack Obama in their commitment to provide tax relief to working-class Americans is the simple fact that millions of them already pay no personal income taxes."

This is the opening sentence of a recent article from Tax Foundation. (H/T to TaxProf Blog.)

Already about 33% of all tax filers pay no income tax. Under the Obama plan, the number is projected to reach 44% and under the McCain plan it is projected to reach 43%.

The article contains this interesting chart showing how the percentage of non-payers has been going up:

I have mixed feelings about this. When the income tax first was implemented, it was designed to affect the highest earners. Most normal workers didn't even notice it.

But now, at least until recently, the requirement of paying at least some income tax was fairly pervasive.

My paleo instincts might suggest to me that it is not such a bad thing to narrow the tax base (in terms of population). But the fly in the ointment is that the government is now the big provider of all sorts of things that cost money. And the budget lately has been growing by the day.

From a policy perspective, however, I wonder what the effect will be on government spending if nearly half of the potential beneficiaries do not have to pay taxes?

A quote by John Adams comes to mind:

The moment the idea is admitted into society, that property is not as sacred as the laws of God, and that there is not a force of law and public justice to protect it, anarchy and tyranny commence. If "Thou shalt not covet," and "Thou shalt not steal," were not commandments of Heaven, they must be made inviolable precepts in every society, before it can be civilized or made free.

John Adams, Defence of the Constitutions of Government of the United States, Works 6:9 (1789)

As I've hinted at before, I think neither of the candidates' policies will ever see the light of day. $700 billion, as a starter bailout, is around $2,300 for every human person gracing the face of our fair country, working or not. I expect in the end that pragmatism will overwhelm theory.

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