Tuesday, September 27, 2016


While on my recent bus trip to Niagara Falls I overheard a conversation between two fellow travelers that included the statement “you know that 47% of Americans are unemployed”.
This is not true.  The current unemployment rate is only about 5%. 

What the two were talking about, I believe, is the infamous “47%” of Americans who either pay no federal income tax or “make a profit” from filing a tax return that was made famous by Mitt Romney in the 2012 Presidential election.
These people are not unemployed.  Many do work and actually have enough income to generate an income tax liability – but the liability is reduced to “0” or these filers receive a refund in excess of the amount withheld (therefore “making a profit” by filing a return) through the use of tax credits, some refundable.  The biggest refundable tax credit is the Earned Income Credit, and you must have “earned income” – i.e. W-2 wages or net earnings from self-employment – in order to qualify for this credit.
The reason for the “47%” – actually now, I believe, about 44% - is the erroneous practice by the idiots of Congress of distributing federal social welfare and other benefit programs via the US Tax Code.  If these benefits were distributed more appropriately – via direct payment from the budget of the applicable department – the beneficiaries that are included in the infamous 47% would be paying federal income tax with the filing of their 1040s (or 1040As), and receiving federal benefits such as welfare and college financial aid directly from the government. 
As I have said many times before the one and only purpose of the federal income tax is to raise the money necessary to run the government – and not to distribute government benefits or “redistribute” income.  As I have said in past posts - 
I am not saying that the government shouldn’t provide financial assistance to the working poor and college students, provide encouragements for purchasing health insurance, making energy-saving purchases and improvements and other ‘worthy’ actions.  What I am saying is that such assistance and encouragements should not be distributed via the Form 1040.
The benefits provided by the Earned Income Tax Credit and the refundable Child Tax Credit should be distributed via existing federal welfare programs for Aid to Families with Dependent Children. The benefits provided by the education tax credits and deduction for tuition and fees should be distributed via existing federal programs for providing direct student financial aid. The benefits provided by the Premium Tax Credit, the energy credits, and other such personal and business credits should be distributed via direct discount payments to the appropriate vendors or direct rebate programs, similar to the successful Cash for Clunkers program of a few years ago, funded by the budget of the appropriate Cabinet departments.
Distributing the benefits in this manner is much better than the current method for many reasons:
1. It would be easier for the government to verify that the recipient of the subsidy, discount or rebate actually qualified for the money, greatly reducing fraud. And tax preparers, and the IRS, would no longer need to take on the added responsibility of having to verify that a person qualifies for government benefits.
2. The qualifying individuals would get the money at the “point of purchase,” when it is really needed, and not have to go “out of pocket” up front and wait to be reimbursed when they file their tax return.
3. We would be able to calculate the true income tax burden of individuals. Many of the current “47 percent” would still be receiving government benefits, but it would not be done through the income tax system, so they would actually be paying federal income tax.
4. We could measure the true cost of education, housing, health, energy and welfare programs in the federal budget because benefit payments would be properly allocated to the appropriate departments."
I do believe that there should be a true “minimum tax” – not the “alternative” minimum tax we now have thanks to the laziness of Congress.  Every American citizen aged 19 through 64 who is not a full-time student should pay a minimum tax of, let’s say, $100 in federal income tax each year!
The bottom line - the US Tax Code must be shredded and totally rewritten from scratch!

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