03 June 2011

I’ve Got a Bad Feeling About This

Scott Adams notes the problem with an increasing number of people who don’t pay taxes:

We all understand that no entity can survive for long if it gives away its resources while asking nothing in return. And this leads me to my point: In the United States, 51% of adults pay zero federal income tax, and yet they have the right to vote. That’s the very definition of a system that can’t last.
I’m not sure where the tipping point is. So far, the power of the non-tax-paying majority has been blunted by the influence of political parties and the misdirection of the media. If the majority ever figures out that they can legally confiscate the wealth of the minority, tax rates will double overnight. My best guess is that the United States will go into a death spiral at about the point that 55% of adults pay no federal income taxes. We’ll probably get to that point as baby boomers continue to retire in large numbers. 

As Vox has noted, “It's not quite a legitimate analysis, in that many of those who don't pay any income tax do pay payroll taxes.”   I would also add that everyone pays certain federal taxes indirectly, like the taxes on automotive fuel, so even those living off government largesse don’t escape all taxes.  At any rate, Adam’s sentiment is largely correct, and is a sentiment shared by economists Thomas Sowell and Walter Williams, among a host of others.

Furthermore, the United States is definitely trending towards becoming a nation that has more taxtakers than taxpayers.  Consider the following chart from Zero Hedge:

Usage of food stamps over the last four years

If this trend keeps up, we will definitely be in trouble.

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