Notes from the Chicago National War Tax Resistance Conference

From the Amsterdam, New York Evening Recorder:

Holds War Is Illegal, Refuses to Pay Taxes; Truman May Be Witness

A subpoena has been served on former President Harry S. Truman calling for him to explain why the United States entered the Korean War. But he will not have to appear in Federal Court .

The subpoena was obtained by Fyke Farmer, [a] Nashville, Tenn., lawyer who has challenged the right of the government to collect income taxes for war purposes. He contends the Korean War resulted from “illegal policies.”

Truman was directed to appear in court by the subpoena, but an attorney said a court order had been issued staying the appearance pending a hearing on a motion to quash the summons.

On this blog I’ve tried to flesh out the strategy of owing no federal income tax by keeping taxable income low and qualifying for tax credits.

But Greg Mankiw reminds me that a person’s financial contributions to government may not be best measured by the amount of taxes paid, but by the amount of taxes paid minus the amount of cash benefits received.

By this measure (at least as the Congressional Budget Office crunches the numbers), the typical household in the least-well-off 60% of America costs the government more than it pays in taxes.

The government measures the amount of taxes it estimates are paid by households in the five income quintiles. And it also measures the direct transfer payments from the government, which include:

…cash payments from Social Security, unemployment insurance, Supplemental Security Income, Temporary Assistance for Needy Families (and its predecessor, Aid to Families with Dependent Children), veterans’ programs, workers’ compensation, and state and local government assistance programs. They also include the value of in-kind benefits, such as Supplemental Nutrition Assistance Program vouchers (formerly known as food stamps), school lunches and breakfasts, housing assistance, energy assistance, and benefits provided by Medicare, Medicaid, and the Children’s Health Insurance Program. (The value of health insurance is measured on the basis of the Census Bureau’s estimates of the average cost to the government of providing such insurance.)

This does not include other government payments, such as pay and benefits for government employees, payments to government contractors, and the like. But that caveat aside, who is financially supporting the government and who is costing it (numbers from 2009)?

quintileaverage household incomegovernment transfers to householdfederal taxes paid by householdsupport for / cost to government
lowest income$7,600$22,900$0$−22,900

There are a lot of stories you can start to tell about a data table like this, but before you start to compose one of your own, it’s good to keep in mind that at least some of this data can be explained by the growing ranks of retirees, who tend to have lower income, more government transfers (social security and the like) and smaller households (meaning that per-person, retirees swell the population of “households” in their quintile more than others, and so may seem overrepresented in data like this).

Note also that the “government transfers” include items that are normally part of state government budgets, but the “taxes” only include federal taxes, so this table also exaggerates things that way.