Is There a Growing War Between the Rich and the Poor?

By Michael Thompson, Contributing Writer 

When it comes to poverty in the United States, it seems to me a growing number of wealthy and upper-middle-class people are resentful of poor folks. There is a perception that people at and near the bottom are shiftlessly going along for a free ride. Although this may be true in some cases, it's not true for the vast majority. I'm an advocate for the poor and a political liberal, but also a realist. There are good and bad, mostly good, in all income groups. 

We see the have/have not friction in debates regarding taxes. I don't understand why the haves are so honked off, because they're paying their lowest rates since the Eisenhower years, but over and over I hear the complaint, "Half of the people don't pay any taxes." 

Well, actually it's 46 percent, according to a recent CNN Money report. So let's check a few facts: 

-- Most of these people are working. Under the tax code, they don't make enough money. 

-- Most are paying taxes, just not general federal income taxes. They're paying entitlement payroll taxes for Social Security and Medicare. Often they're paying state taxes, which are less progressive than the federal code. They're paying local property taxes, even as renters, because the property taxes are part of the rent. And they're paying sales taxes, the most regressive form of taxation. 

Consider a low-income family of four. The father makes $12 an hour as a janitor, not too shabby, but he only gets 30 hours per week. Mom makes $9 an hour as a nurse aide (the nation's most underpaid profession, in my opinion), but she only gets 20 hours. Their income is $510 per week and $26,400 annually, deducting a handful of uncompensated sick days. (People in these sorts of jobs don't get paid when they call in sick, so  they often work when ill.) 

So, $26,400, eh? What a coincidence! If you combine the standard deduction of $11,600 with four individual deductions of $3,700 apiece, that's a matching amount: $26,400. And so this family pays no federal income tax (although plenty of Social Security and state/local taxes). What bugs me is that somebody earning $200,000 or maybe a cool million (with only the first $110,000 subject to Social Security) would have such a big problem with the less fortunate family. 

There are families and individuals making more than $26,400 that also pay no taxes. In fact, many receive rebates. The main reasons are child care credits, education credits and mainly the Earned Income Tax Credit. The purpose of the EITC, first advocated by Richard Nixon and then embraced by Ronald Reagan, is to justify keeping the minimum wage artificially, and despairingly, low. Conservative tax-baiters should realize that the EITC is not a liberals' concoction. Small business owners and their chambers of commerce love the Earned Income Tax Credit, so that they can continue paying poverty wages. 

Nearly half of Americans indeed pay no federal income taxes, but if the various credits and deductions were canceled, the figure would drop to 18 percent. Maybe that would make some deep-pocketed people at the country club happy. Why? 

SOURCE: http://money.cnn.com/2012/04/26/pf/taxes/income-tax/index.htm?hpt=hp_c1