NEW YORK – A new Congressional Budget Office study has torn a hole in yet another one of President Obama’s insistent claims about the way things are.
The Congressional Budget Office study, “The Distribution of Household Income and Federal Taxes, 2010, ” shows that the top 40 percent of households, based on pre-tax income, paid a remarkable 106.2 percent of the nation’s income tax in 2010. Meanwhile, households in the bottom 40 percent paid “negative income tax,” receiving an average of $18,950 in government transfer payments while paying no federal income tax.
That fact contradicts the Saul Alinsky-like theme central to President Obama’s 2012 re-election campaign in which he claimed “the rich are not paying their fair share of income taxes.”
The poor in America not only pay no income tax, they receive various government payments drawn from income tax revenues paid by the so-called “rich”
The CBO determined that in 2010, the lowest income quintile of taxpayers in America paid an individual income tax rate of -9.2 percent, while the second lowest income quintile paid -2.3 percent.
Why the poor pay ‘negative income tax’
The CBO explained that a group of U.S. taxpayers was considered to have a “negative income tax rate” when refundable tax credits, in terms of government transfer-payments to the group, exceeded the income tax the group would otherwise earn.
This produces the disparity in which the higher-income groups of taxpayers end up paying more than 100 percent of all income tax paid, as a result of needing to generate from income tax revenues the tax credit transfer payments the government “owes” lower income Americans.
“Because the federal tax system is progressive – average rates rise with income – shares of taxes paid exceed shares of income for the highest income group, and the opposite holds true for the bottom four quintiles,” the CBO explained.
Included in the government transfer payments paid disproportionately to lower income groups are the following: Social Security and Medicare payments, as well as other government benefits paid from the Supplemental Nutrition Assistance Program, or SNAP, generally known as “food stamps”; benefits from the Children’s Health Insurance Program; and various “earned income tax credits” calculated for lower-income wage earners.
“Social Security and Medicare go predominately to elderly households, many of which have low market income,” the CBO explained.
43 percent pay no federal income tax
In a separate study, the Tax Policy Center has reported 43.3 percent of all U.S. households are expected to pay no federal income tax in 2013. The figure is down slightly from the Tax Policy Center’s 2009 estimate of 47 percent paying no federal income tax, an estimate that went viral to the detriment of the Romney presidential campaign.
Of the 43 percent that will owe no federal income tax in 2013, the Tax Policy Center estimated nearly half will be off the rolls because their incomes are too low. The other half will be off the rolls because federal government income redistribution in the form of transfer-payments such as the Earned Income Tax Credit and the Child Tax Credit exceed the amount the taxpayer would otherwise have owed in income tax.
Fully 14 percent of all U.S. households this year can be expected to pay no income tax and no payroll taxes simply because they are not working, either because they are unemployed and looking for work or because they have dropped out of the labor force.
Poverty in USA rises under Obama
WND reported recently that poverty has increased under President Obama, with Census Bureau statistics showing more Americans on welfare than working full time.
Despite the trillions of dollars spent in anti-poverty programs since President Lyndon Johnson launched “The Great Society” in 1964, the U.S. under President Obama has just seen the highest spike in poverty since the 1960s, leaving 50 million Americans living below the poverty line, defined as a family of four earning less than $23,021 a year.
As measured by the Census Bureau, median U.S. household income fell for the fifth straight year in 2012, to $51,017, the lowest annual income adjusted for inflation since 1995. Income inequality has intensified, with the top 5 percent of all households earning 22.3 percent of all the nation’s income in 2012.
Nearly one out of five U.S. households were enrolled in the federal government’s Supplemental Nutrition Assistance Program, or SNAP, commonly known as food stamps. There were 22,993,709 American households enrolled in the program in August, totaling 47,665,069 persons, approximately one in every seven Americans, as compared to the 1970s when about one out of every 50 Americans was on food stamps.
Since President Obama took office, the federal government has spent a total of $3.7 trillion on approximately 80 different means-tested poverty and welfare programs, excluding Social Security and Medicare. The sum is nearly five times greater than the federal government spent on NASA, education and all federal transportation projects over that time.
As WND has also reported, the problem of child poverty in the United States today is alarming.
Michael Synder, the creator of the website TheEconomicCollapse.com, points out that about one of every four U.S. children is enrolled in the food stamp program, while 50 percent of all U.S. children will be on food stamps before they reach the age of 18.
Some 17 million children in the U.S. are facing food insecurity, with “one in four children in the country is living without consistent access to enough nutritious food to live a healthy life.”
According to an October report published by the Southern Education, 60 percent of the public school children in American cities were in low-income households, with Mississippi leading the list (83 percent), followed by New Jersey (78 percent) and New York (73 percent).
While the problem of poverty in the public schools is most intense in the cities, it is by no means limited to the cities. Fully 50 percent of the public school children in America across all classifications – urban, suburban and rural – were in low-income households in 2011. It was the first time ever that half the nation’s public school student population could be considered to be living in or near poverty levels.
The crisis in public school poverty is not only a crisis for today, it is also a crisis for tomorrow. Low-income public school students face major disadvantages and hardships in gaining the educational skills required to emerge from poverty as adults seeking meaningful employment in an increasingly competitive global economy.
Remarkably, the National Center for Homeless Education, a group affiliated with the University of North Carolina at Greensboro, funded by the Department of Education, reported in October that there were 1.2 million homeless students in U.S. public schools during the 2011-2012 academic year, from preschool through high school – a record number up 10 percent from the year before and up 72 percent from the start of the recession.
A long list of “warning signs” listed by the National Center for Homeless Education has been presented to public school officials to help them discern if a child may be homeless. They include chronic hunger, including hording food; poor self-esteem and unwillingness to risk forming relationships with peers and with teachers; fear of abandonment, a need for immediate gratification; and what is designated as “school phobia,” an unusual need to be with the parent.
The New York Post reported last month that even in the Big Apple, one of America’s wealthiest cities, the subways are being “overrun with homeless.”