Millions of Voters Pay No Federal Income Tax. Many More Will Join Them if Senator Obama's Tax Policy is Implemented. Should We be Concerned?

Adam Lerrick, professor of economics at Carnegie Mellon University, recently published an article in the Wall Street Journal which warns about this issue. His assertions are based on startling data. Should we be concerned? Yes we should.

According to professor Lerrick, 40% of eligible voters—89 million people—paid no income taxes in 2006. And he says the percentage will increase to 49% as a result of Senator Obama’s proposed tax credits. Further, another 11% of the electorate pay less than 5% of their income in income taxes.

This all means that “three out of every five voters will pay little or nothing in income taxes under Senator Obama’s plans,” he wrote.

Professor Lerrick warns that we're near a tipping point where “half of all voters will receive a cash windfall from Washington (under the Obama plan)."

Is this a good thing?

If you think it is consider that professor Lerrick cautions that it is only a matter of time before Senator Obama's proposed new taxes prove to be inadequate. Government spending will be too great. He predicts that tax increases will ultimately need to be levied upon many additional households, those with incomes of $75,000 or more.

Perhaps the most eye-catching statistics he cites are these:

• Just 5% of taxpayers earn more than $250,000.
• Yet this group pays 60% of the federal income tax bill.

If you’re not part of the 5%, you have a strong incentive to support Senator Obama's tax plan. Chances are you will receive a direct economic benefit, one that the government deems "fair." But such benefits have proven to be self-defeating.

“Other nations have tried the ideology of fairness in the place of incentives and found that reward without work is a recipe for decline,” professor Lerrick says.

It's worth repeating: "...reward without work is a recipe for decline."

It will take a while before the electorate sees this. But by then the damage will have been done in the form of still higher taxes and more economic troubles.

"Taxation without representation is tyranny!" That was a rallying cry when our country was founded. The American Revolution and our democratic form of government took care of that. So, are we threatened by tyranny today? “No,” I want to say dismissively.

But then, like a deer caught in the headlights, I am stunned by the staggering number of eligible voters who pay little or no federal income taxes--and, who will receive an economic benefit through Senator Obama's proposed tax plan.

I think professor Lerrick is warning us about what Alexis de Tocqueville termed “tyranny by the majority.” That occurs when the majority causes government to do something ultimately detrimental to society as a whole. Should Senator Obama's tax plan become effective, we may well be faced with such a dilemma.

A majority of U.S. voters, who enjoy representation, may largely avoid taxation. We should all be concerned about that.
________________________________________________________
* For his article professor Lerrick draws on 2006 U.S. Census data (the most recent available) and an analysis by the Tax Policy Center. The Center is a joint venture of the Brookings Institution and the Urban Institute. Brookings is one of the Washington’s oldest non-profit think tanks. It is headed by Mr. Strobe Talbot, a former TIME magazine reporter and diplomat in the Clinton Administration. Mr. Talbot and President Clinton were Rhodes Scholars together at the University of Oxford. The Urban Institute is a Washington, D.C., non-profit think tank which educates Americans on social and economic issues. It was founded during President Lyndon Johnson's administration to provide nonpartisan analyses of the problems facing America's cities. It is headed by Mr. Robert D. Reischauer a former director of the Congressional Budget Office and nationally known expert on the federal budget, Medicare, and Social Security.