People are always getting confused when I tell them that a lot of my tax preparation clients aren’t taxpayers. Instead, I classify them as taxfilers. The distinction comes from the reality that about 47% of American households do not pay income tax. Not only do they not pay into the Federal government, but they actually draw money out of the IRS. These are households that don’t pay taxes, but they sure do file, because otherwise you miss out on all that free government money.
The amount of money is significant, particularly when considered as a percentage of annual income. If you have two children, and earn $12,000 in wage income (pretty close to a full time job at minimum wage), the Federal government will give you $7000, or just over a third of your annual income.
Then you plug in the value of food stamps. The formulas are a little complicated, but in our example the annual benefit is around $5500 for a three person family, and $7000 for a family of four.
Using the family of four gives us earned income of $12,000, and total income of $26,000. So if you ever wonder how people make ends meet on a minimum wage job, the answer is that the 53% of us who pay taxes are picking up the slack.
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