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Are there people who pay no taxes?

Khaos_Mage
Posts: 23,214
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1/23/2013 4:30:44 PM
Posted: 3 years ago
To those who say there is no non-taxpayers, I disagree.
You may be technically correct, in the sense that they will pay payroll, sales, and/or property taxes, but effectively, there are some who do in fact pay zero in net taxes.

Take a single mother with two kids making $30,000/year.
Due to EIC and the child tax credits, claiming HOH with 3 exemptions...
Her tax liability is $0, with refundable credits totaling $3,519 in from the feds, and another $686 from MN. This is a total of $4,205.

Now, there are only four taxes this woman would have paid: sales tax, payroll tax (7.65%), local taxes, and property tax. Since this hypothetical woman rents, she does not directly pay any property taxes, so it shouldn't count. However, let's assume she paid $1,000/mo in rent, she would receive a rental rebate from MN for another $1,395, regardless of how much of her rent actually went to property taxes.

So, tax forms pay out $4,205
- N/A property taxes
- $2,295 payroll taxes (even though in 2012 it would be less)
- $0 for local taxes
- $2,062.50 sales tax (assuming every dollar was spent on taxable goods at 6.875%)

Total net taxes would be $152.50, but if only $2,218.18 was spent on non-taxable goods (like rent, clothes, and most food), there would be no net taxes.

How, in this example, does the individual pay any taxes?
My work here is, finally, done.
malcolmxy
Posts: 2,855
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1/23/2013 4:43:13 PM
Posted: 3 years ago
At 1/23/2013 4:30:44 PM, Khaos_Mage wrote:
To those who say there is no non-taxpayers, I disagree.
You may be technically correct, in the sense that they will pay payroll, sales, and/or property taxes, but effectively, there are some who do in fact pay zero in net taxes.

Take a single mother with two kids making $30,000/year.
Due to EIC and the child tax credits, claiming HOH with 3 exemptions...
Her tax liability is $0, with refundable credits totaling $3,519 in from the feds, and another $686 from MN. This is a total of $4,205.

Now, there are only four taxes this woman would have paid: sales tax, payroll tax (7.65%), local taxes, and property tax. Since this hypothetical woman rents, she does not directly pay any property taxes, so it shouldn't count. However, let's assume she paid $1,000/mo in rent, she would receive a rental rebate from MN for another $1,395, regardless of how much of her rent actually went to property taxes.

So, tax forms pay out $4,205
- N/A property taxes
- $2,295 payroll taxes (even though in 2012 it would be less)
- $0 for local taxes
- $2,062.50 sales tax (assuming every dollar was spent on taxable goods at 6.875%)

Total net taxes would be $152.50, but if only $2,218.18 was spent on non-taxable goods (like rent, clothes, and most food), there would be no net taxes.

How, in this example, does the individual pay any taxes?

Now figure out a guy with no kids who makes $50,000 and gets a tax deduction for the nearly 100% interest payments from the house he bought in December of the year prior.
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Khaos_Mage
Posts: 23,214
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1/23/2013 5:11:05 PM
Posted: 3 years ago
At 1/23/2013 4:43:13 PM, malcolmxy wrote:
At 1/23/2013 4:30:44 PM, Khaos_Mage wrote:
To those who say there is no non-taxpayers, I disagree.
You may be technically correct, in the sense that they will pay payroll, sales, and/or property taxes, but effectively, there are some who do in fact pay zero in net taxes.

Take a single mother with two kids making $30,000/year.
Due to EIC and the child tax credits, claiming HOH with 3 exemptions...
Her tax liability is $0, with refundable credits totaling $3,519 in from the feds, and another $686 from MN. This is a total of $4,205.

Now, there are only four taxes this woman would have paid: sales tax, payroll tax (7.65%), local taxes, and property tax. Since this hypothetical woman rents, she does not directly pay any property taxes, so it shouldn't count. However, let's assume she paid $1,000/mo in rent, she would receive a rental rebate from MN for another $1,395, regardless of how much of her rent actually went to property taxes.

So, tax forms pay out $4,205
- N/A property taxes
- $2,295 payroll taxes (even though in 2012 it would be less)
- $0 for local taxes
- $2,062.50 sales tax (assuming every dollar was spent on taxable goods at 6.875%)

Total net taxes would be $152.50, but if only $2,218.18 was spent on non-taxable goods (like rent, clothes, and most food), there would be no net taxes.

How, in this example, does the individual pay any taxes?

Now figure out a guy with no kids who makes $50,000 and gets a tax deduction for the nearly 100% interest payments from the house he bought in December of the year prior.

Why?

The fact is there are people who pay no taxes. Is it as many as people claim? No. But they do exist.

For the record, it is likely to be about $6,099 + payroll + state + sales + property, as the mortgage interest deduction + state taxes + 1/12 of property taxes is unlikely to be more than the standard deduction. However, if he prepaid interest, or had PMI, this could be a factor. Also, the value of the loan, interest rate, and other factors need to be known. But, if it is a "normal" person like me, there would be no tax benefit given this year. Next year, there would be.

Also, I don't know what you mean by the 100% interest payment? Is this supposed to be an interest-only loan?
My work here is, finally, done.
GarretKadeDupre
Posts: 2,023
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1/24/2013 9:04:02 AM
Posted: 3 years ago
I was going to say me, but then again, I paid a 9% tax yesterday when I bought a coke at Wal-Mart.
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Khaos_Mage
Posts: 23,214
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1/25/2013 3:43:06 AM
Posted: 3 years ago
I am a bit disappointed that no one has any real commentary on this, given that at least two people seemed to imply that there are no non-taxpayers in the "should only taxpayers be allowed to vote" thread.
My work here is, finally, done.