Conservative Principles Now

The Tax Foundation recently released its annual report on the number of tax returns filed that have no tax liability, and the study shows a record number of “nonpayers” in 2008. Taxpayers become “non-payers” when credits and deductions wipe out any income tax they owe.

According to the Tax Foundation report, of the more than 142 million returns filed in 2008, almost 52 million have no tax liability. That means more than 36 percent of tax filers paid no income taxes in 2008 – a new record high. This was a steep increase over 2007 when fewer than 33 percent of filers paid no taxes. As the table below shows, the growth of non-payers is a long-term trend that has been accelerating in recent years. For instance, 21 percent of taxpayers were non-payers in 1990.

The amount of income that a family can earn and still be non-payers is also alarming. In 2010, a family of four can earn up to $51,000 and still pay no income taxes.

Not only do a record number of taxpayer’s pay no taxes, but many of them actually receive cash payments through the tax code because of refundable credits like the Earned Income Tax Credit (EITC) and the Child Tax Credit. According to the Tax Foundation, cash payments from these two credits alone totaled over $70 billion.

President Obama’s policies will add to the numbers of non-payers and the amount of income redistributed because he wants to expand and add even more refundable credits.

Like the Tax Foundation’s report, the Heritage Foundation’s Index of Dependence on Government shows a growing dependence on government and a substantial increase in recent years. According to the report, the average recipient of government aid received over $26,000 in assistance in 2008 – a record high.

The growing dependency on government and shrinking number of taxpayers is troubling and will lead to an even faster rise in unsustainable government spending unless the trend is reversed. Congress should start by ceasing the expansion of refundable tax credits. It should then reform entitlement programs like Social Security and Medicare before baby-boomers start collecting benefits from them and dependency on government explodes even further. If Congress starts soon perhaps it won’t be too late to stop the impending fiscal implosion.

At a speech at a General Motors Assembly plant in Lordstown, Ohio, President Obama restated his regret for government interference in the auto industry claiming the decision was out of necessity rather than choice. In what many called a campaign-like speech, the President asserted:

As I’ve said before, I didn’t run for president to manage auto companies. It wasn’t something on my to-do list. It wasn’t even something on my want-to-do list. I like driving cars — sometimes, you know, I can change a spark plug or change a tire, but I don’t know so much about cars that I wanted to be deeply involved in the car industry.”

As long as we’re restating things, let’s take another look at the government’s involvement in the auto industry. There was the $81 billion in government aid that won’t be repaid according to a Congressional Oversight Panel report that was critical “of the way the program was (and is) run. Among these: a failure to define the goals or criteria for the bailout, lack of transparency, and a lack of an exit strategy — leaving the question of when (if ever) the government will be selling its ownership stakes in GM and Chrysler. The report also questioned the government’s ability — as part-owner of these firms in a competitively-neutral hands-off manner, recommending that ownership be transferred to an independent trust.”

Then there was the ‘successful’ cash for clunkers subsidy that destroyed perfectly good cars, distorted the used car market, affected charities relying on cars as donations, and provided dubious environmental benefits.

And just after he said he didn’t want to be “deeply involved in the car industry, Obama and his administration unveiled new clean air and fuel-economy standards that will certainly affect how American companies operate and lead us to more command and control driven agendas that restrict choice as opposed to letting the auto companies adjust on their own to meet consumer demand. The new standards, starting with 2012 models, would “push corporate average fuel economy, or CAFE, standards to a fleetwide average of 35.5 miles per gallon by 2016, four years ahead of the schedule Congress laid out in a 2007 energy law.”

There’s a simple reason we have so many models of cars in the market today. Consumers have different preferences and it’s the auto industries job to meet those preferences. Some prefer more miles to the gallon. Others prefer safety. These new government regulations certainly do a good job of restricting consumer choice and at the same time they raise the production costs for automakers. Fortunately for them, (unfortunately for the taxpayer), the Waxman-Markey cap and trade bill includes provisions allowances to subsidize cost of requipping, retooling and expanding manufacturers’ facilities to produce “advanced technology vehicles.”

It’s been one handout after the next couple with costly regulations that could very well make more handouts necessary to keep the automakers alive. For someone who doesn’t know too much about cars, that’s a lot of planning the industry.