Government Dependency

Record Number of Americans on Public Dole

August 30, 2010

HotAir.com - For some, this will just prove how prescient Congress has been to create a vast network of social programs that combat poverty.

Others may wonder what the endgame looks like when one in six Americans now receive public subsidies through Medicaid, unemployment, or other welfare programs. That ratio is a new record, according to USA Today:

Government anti-poverty programs that have grown to meet the needs of recession victims now serve a record one in six Americans and are continuing to expand.

More than 50 million Americans are on Medicaid, the federal-state program aimed principally at the poor, a survey of state data by USA TODAY shows. That’s up at least 17% since the recession began in December 2007.

Think the Medicaid growth comes from the passage of ObamaCare in March? Think again. The expansion comes from the Great Recession and the loss of millions of jobs. The ObamaCare expansion will come on top of the additions to the enrollments over the last two years, and that has major implications for health care providers and customers alike:

The program has grown even before the new health care law adds about 16 million people, beginning in 2014. That has strained doctors. “Private physicians are already indicating that they’re at their limit,” saysDan Hawkins of the National Association of Community Health Centers.

Some of those 16 million to be added may be part of the expanded enrollment now, of course. However, even if the number left to be added is just half of the original 16 million estimate, it will drop like a bomb on provider networks. Medicaid already pays below Medicare in reimbursements, for instance, and far below private-sector health insurance. That’s why many providers won’t take Medicaid patients at all anymore, which pushes Medicaid patients into emergency rooms at a far higher pace than the uninsured. We can expect to see even greater pressure on clinics and hospitals as a result.

But even outside of ObamaCare, the sudden growth calls into question the sustainability of the welfare state in the US. Having one in six on some form of public subsistence perhaps underscores the real nature of unemployment and underemployment in the US, but voters have to also wonder at what point we can afford to keep going.

We already have entitlement programs like Social Security and Medicare about to sink into a sea of red ink because the worker-to-beneficiary ratio has dropped too low for the programs to remain on their current trajectories. If every American has to support one-sixth of another outside of family through taxation, then either taxes will have to get hiked substantially or benefits and means tests have to be rethought.

Many Americans Pay No Federal Income Tax; Earnings, Credits Eliminate Liability

April 8, 2010

Associated Press - Tax Day is a dreaded deadline for millions, but for nearly half of U.S. households it's simply somebody else's problem.

About 47 percent will pay no federal income taxes at all for 2009. Either their incomes were too low or they qualified for enough credits, deductions and exemptions to eliminate their liability. That's according to projections by the Tax Policy Center, a Washington research organization.

Most people still are required to file returns by the April 15 deadline. The penalty for skipping it is limited to the amount of taxes owed, but it's still almost always better to file: That's the only way to get a refund of all the income taxes withheld by employers.

In recent years, credits for low- and middle-income families have grown so much that a family of four making as much as $50,000 and with two children younger than 17 will owe no federal income tax for 2009, according to a separate analysis by the consulting firm Deloitte Tax.

Tax cuts enacted in the past decade have been generous to wealthy taxpayers, too, making them a target for President Barack Obama and Congressional Democrats. Less noticed were tax cuts for low- and middle-income families, which were expanded when Obama signed the massive economic recovery package last year.

The result is a tax system that exempts almost half the country from paying for programs that benefit everyone, including national defense, public safety, infrastructure and education. It is a system in which the top 10 percent of earners -- households making an average of $366,400 in 2006 -- paid about 73 percent of the income taxes collected by the federal government.

The bottom 40 percent, on average, make a profit from the federal income tax, meaning they get more money in tax credits than they would otherwise owe in taxes. For those people, the government sends them a payment.

"We have 50 percent of people who are getting something for nothing," said Curtis Dubay, senior tax policy analyst at the Heritage Foundation.

The vast majority of people who escape federal income taxes still pay other taxes, including federal payroll taxes that fund Social Security and Medicare, as well as excise taxes on gasoline, aviation, alcohol and cigarettes. Many also pay state or local taxes on sales, income and property.

That helps explain the country's aversion to taxes, said Clint Stretch, a tax policy expert Deloitte Tax. He said many people simply look at the difference between their gross pay and their take-home pay and blame the government for the disparity.
The federal income tax is the government's largest source of revenue, raising more than $900 billion -- or a little less than half of all government receipts -- in the budget year that ended last Sept. 30.

But with deductions and credits, especially for families with children, there have long been people who don't pay it, mainly lower-income families.

The number of households that don't pay federal income taxes increased substantially in 2008, when the poor economy reduced incomes and Congress cut taxes in an attempt to help recovery.

In 2007, about 38 percent of households paid no federal income tax, a figure that jumped to 49 percent in 2008, according to estimates by the Tax Policy Center.

Income tax rates were lowered at every income level, making it relatively easy for families of four making $50,000 to eliminate their income tax liability.

Here's how they did it, according to Deloitte Tax:

The family was entitled to a standard deduction of $11,400 and four personal exemptions of $3,650 apiece, leaving a taxable income of $24,000. The federal income tax on $24,000 is $2,769.

With two children under 17, the family qualified for two $1,000 child tax credits. Its Making Work Pay credit was $800 because the parents were married filing jointly.

The $2,800 in credits exceeds the $2,769 in taxes, so the family makes a $31 profit from the federal income tax.