No Tax? How Did That Happen?

I was struck by an article on CNN.com this past week that suggested that 47% of households will owe no federal income tax in 2009.  My first reaction to such a statement is "that can't possibly be true!"   Even allowing for the fact that many of this 47% will still be paying state and local taxes, as well as Medicare and Social Security taxes taken right out of their paychecks, that an amazingly high number!  But the more I think about it, the more I feel that the figure may not be so far off....

We've been told for some time now that unemployment rates are hovering around 10%.  Of course, that 10% isn't "households," but rather "10% of adults."  A married couple with only one spouse working, for example, would mean that the "non-working" spouse is counted as "unemployed," without respect to whether or not the working spouse makes enough for the entire household to live on.  To put it another way, this kind of a "household" isn't unemployed.  One spouse has a job, and it may possibly pay well enough that this household won't be in the 47%.  Naturally, if one spouse doesn't have a paying job, the odds of being in that 47% are indeed greater.  Indeed, it's been the case for decades now that it's getting harder and harder to make ends meet without both parents having incomes in a household with children.  Indeed, this phenomenon has had more than a few youth workers concerned that children aren't getting the parental attention they need.  Parents have to make a choice between enough food on the table and proper supervision, and there are no easy answers.

I imagine that the problem is especially difficult in a state like California, where the cost of living is ridiculously high (although at least we're not as bad as New York, judging from the chart on the left!).  I actually doubt I'll be in that "tax free" 47% percent, myself (I guess I'll find out sometime between January 31st and April 15th), but I still struggle to make ends meet.  And I'm most definitely one of the lucky ones!  The unemployment rate in California is over 12%!  So a smaller percentage of us even have jobs with which to try to earn even more money needed to get by....  So I'm thankful that both my wife and I have jobs, however much we wish that they paid better (or, perhaps even more to the point, that my wife, who's working on a PhD, didn't have to hold a job in order for us to be able to pay for rent and food.  Then she might have the time she needs to study and prepare for her upcoming dissertation work).  I have to imagine that means that things are that much worse for many, many of my fellow California citizens (who may not even have the option of selling Transformers or e-books to try to make up the difference.  Yes, this is a shameless plug!).

I'm not looking to get into the question (raised by the original article) about whether or not the tax system is too "progressive," or if the current situation is "sustainable" or not.  We already know that the government will have to start taking in more revenue anyway, even without accounting for whether or not they're getting funds from a broad enough base of the America people.  Thankfully, there are signs that the economy is starting to turn around.  Although this still hasn't translated into a reduction of the unemployment rate (at best, the rate of growth in the numbers of people who are unemployed may be slowing down, but that's still not an actual reduction), there is perhaps reason to hope that such a reduction will come sooner rather than later.  I certainly would argue that it can't come soon enough!