A recent article in the Boston Globe (a response to the Romney tax disclosures) notes that:
“In fact, nearly half of US taxpayers will probably pay no taxes at all for 2011, including 24,000 in the top 1 percent of incomes, according to the Tax Policy Center, a think tank in Washington. Some low-income families even get back more than they pay because of the Earned Income Tax Credit and other programs.”
And if they do pay full tax, what is the top tax rate in the United States?
“Congress decreed a decade ago that the wealthiest Americans pay a top income tax rate of 35 percent. But as Romney shows, hardly anyone – even billionaires and multimillionaires – pay anywhere close to that.”
Yes, you read right! Many U.S. residents pay no income taxes (and little in sales taxes – see below). Yet, the IRS is hunting U.S. citizens living outside the United States to hit them with massive penalties for not filing FBARs that they didn’t know about! An income tax rate of 35% is nowhere near the top rate in Canada. It is closer to 50% and it kicks in at a lower amount of income. But, that’s just the income taxes. There are other taxes.
In addition, Canada and most European countries have huge VAT (value added taxes). In Canada, this is know as the HST. Sales taxes are the only way to ensure that either everybody pays taxes, or taxes are paid for every person. Although most U.S. states have sales taxes, there is no U.S. Federal Sales tax. Furthermore, the states that do levy sales taxes, do not have a rate that approaches the 13% in Canada (and higher in Europe where it tends to be hidden in the price).
Yet, by God the American Public, or a large part of it, is convinced that U.S citizens living outside the United States are tax cheats.
If I didn’t know better, I might think that the IRS thinks it is the job of U.S. citizens living abroad to pay the bills of those U.S. citizens at home who don’t pay taxes. The IRS has enlisted Mr. FBAR as a tool to drain the retirement accounts of U.S. citizens abroad.
I think the real tax cheats are the almost 50% of Americans living in the US who don’t pay any taxes yet use the services. There are too many ordinary Americans down there who through all their deductions end up paying no tax, and most of these people are not rich. You can’t run a country that way.
In Canada everybody pays taxes no matter how little they make.
If Americans living in the US want to see a tax cheat, half of them just need to look in the mirror.
What about you? When you look in the mirror, do you see a “tax cheat”?