Credits

The question often comes up as to why half of the taxpayers pay so little income tax. Here is an example to illustrate the point. Married couple with three children earning $60,000 Standard deduction $12,600 Personal exemptions 5 $20,000 Taxable income $28,000 Tax on $28,000 for married filling joint $3,277 Subtract from tax due the child tax credit of $1,000 per child and this couple owed $277 in income tax. Since the average income is $53,000 more than half pay no income tax. The interesting thing about the child tax credit is that it pays even if no tax is owed. In tax language this is called a refundable credit. Here is another example. Married couple with stay at home mom and dad works at Walmart and earns $19,000. This family receives $3,000 child tax credit, plus $6,200 earned income credit. In addition there is a MN working family credit of $2,000 so this person who has reported income of $19,000 has in fact a gross income of over $30,000 and of course pays no income tax. I do not believe it is acceptable for a working man to raise three children on $30,000 per year and I have no idea how they do it but many do. Some have suggested raising the child tax credit to $5,000 and I would not object to that as I believe that a man who works full time should make enough money to support his family. Doing this would cost the government $200 billion dollars per year and they can just print it up since that is what they do when they need money for things like the bank bailout.