And what about the 53%?

Dear people posting on the 53%: I don’t think all of you really are in the 53%.

So, I wrote a little post about the 99% stories on tumblr the other week, but what about the 53%?  You know, the 53% of the U.S. who have a large enough incomes to pay income tax.  There are posts about them on We Are The 53%.  The reason I bring this up is, while reading the signs that were posted, it occurred to me:  these people probably don’t pay the income tax they claim to pay.  Let’s look at an example:

Unknown Author via We Are The 53% on TumblrAlright, it’s math time!

We have a young mother of three who says that her family helps her out.  She makes it sound like she’s the primary caretaker of her children and her kids are her dependents, so I’m going to bet she qualifies as a Head of Household for IRS purposes.  She gives us some hints about her lifestyle, so I’m going to try to make some reasonable assumptions about her income and see if she is, in fact, in the 53%.*

So, we have a single Mom filing Head of Household with three dependents.  She works at a grocers for, on average, 25 hours per week.  I would guess her income is around $9.00 per hour (I’m trying to guess high, to give her every benefit of the doubt.)  So, that would make her gross earnings around $11,700. (52 weeks x 25 hours per week x $9.00 per hour)  I gave her three dependents that were born in 2002, 2004, and 2006.  I assume she receives Pell grants to pay for her education, since she is almost certainly eligible for them.  This means that she probably doesn’t have any education deductions, which will make it more likely that she has tax.

You know what, I can just stop here:

Estimated tax calculations for 2010
Gross Income $11,700
Less Standard deduction for Head of Household -$8,400
Less Four exemptions at $3,650 -$14,600
Equals No Taxable Income

So, she’s not a member of the 53% who pays income taxes, since she probably doesn’t pay income taxes.  Even if she wasn’t Head of Household and filed as Single, she still wouldn’t have any taxable income.

I would also like to take a second to point out that this calculation doesn’t include refundable credits.  That means that it’s likely that she has a negative tax rate due to earned income credit (EIC), additional child tax credit, and the making work pay credit.  My super-rough calculations show that she (assuming the above is true), should’ve gotten EIC of $5,276 plus the making work pay credit of $400 (if she didn’t receive it earlier), and additional child tax credit of $1,305.  That’s a grand total of $6,981, making her effective tax rate -59.7%.

So, why is she holding up a sign claiming that she’s in the 53%, when it seems, from her own testimony, that she’s not in the 53%?  I’ll leave that as an exercise to the reader.

In closing, our income tax system is designed so that those who earn more in a particular year have greater responsibility for the costs of our society.  If someone is working through tremendous hardship, earning low wages, and has a family; it’s highly unlikely that they’re paying any taxes at all.  It’s also likely that they are taking entitlements through the refundable credit system.  In which case, they wouldn’t be in the 53%, would they?

*  I’m just slapping this together by 2010 tax rules, so it isn’t gospel or anything.  I’m just trying to shed some perspective, here.

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