Poll: 47% of Households Will Not Owe Taxes in 2009 – Is That Fair?

I don’t think you can find a single person out there who enjoys paying taxes, but I encountered an interesting article on CNN this morning that said nearly half of all U.S. households will not owe any federal income tax for 2009. At first I thought I was reading it wrong or that they were using a provocative headline to grab attention, but after reading the story it seems as if it’s true.

While it doesn’t come as a surprise that lower income households make up the bulk of the households that don’t pay taxes, it was a bit shocking to see that over 25% of those who don’t pay taxes earned more than $50,000 a year, and even 7% came from the $100,000 a year or more group. That means there is a lot of money being left on the table in terms of tax revenue. To be more specific, that’s over 70 million households.

Obviously, we have a progressive tax system that ensures those with lower incomes pay fewer taxes and may even get some tax credits back, but it also looks like there is a lot of money out there that isn’t getting taxed even by some with higher incomes. Now, I’m not suggesting we need to tax people more to make up the lost revenue, because frankly, I hate paying taxes and feel I pay way more than I should. But, as we continue to operate at such a deficit and people want to spend even more money and expand government programs I have to wonder where this money is going to come from.

Is it fair that roughly half of all households earning an income are getting away without paying Uncle Sam? I’m just curious to see where you guys stand on this issue. Has the tax system become too progressive and it’s leaving a wider tax gap between the rich and the poor? Or are things not progressive enough and we should tax those who earn more money at an even higher rate to recover tax revenue?

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