They're supposed to, though. Read IRS Publication 1 or whichever one it is that comes with the yearly 1040. Drug dealers and prostitutes are supposed to pay taxes on their earnings. ;)

But that would be the beauty of a national sales-tax system, such as is explicitly provided for in the Constitution. The only way to evade it would be to make recourse to the black market. Somehow I doubt that even the most hardened criminals and tax evaders would see a reason to buy toothbrushes, toilet paper, and blueberry muffins on the black market just to avoid a few cents' tax. Who knows? Maybe they would. But at least we'd eliminate that vast swath of Americans who don't pay taxes purely by virtue of being below some arbitrary income level.

Accountants would fight such a system tooth and nail. A lot of their billable hours come from navigating their way through the absurd complexity of our deduction system.

Another thought on borrowing to pay for healthcare: I don't know about you, but I'd ridicule someone who took out a loan to make a charitable donation. No matter what the purpose, living beyond your means is dangerous. Yet that is exactly what our federal government is doing right now. How is it any different?

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Oh man. If you want to go on the subject of "Why isn't the government held to the same or remotely close to the same standards as private citizens or companies", you could go on for years.

Heh. You could spend a lifetime on that book and not even be half done.

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I know those disreputable types are the easy ones to blame, but I think nonstop meant that percentage of Americans don't OWE federal income taxes.

Link 

47% will pay no federal income tax
An increasing number of households end up owing nothing in major federal taxes, but the situation may not be sustainable over the long run.

By Jeanne Sahadi, CNNMoney.com senior writer
Last Updated: October 3, 2009: 2:58 PM ET

NEW YORK (CNNMoney.com) -- Most people think they pay too much to Uncle Sam, but for some people it simply is not true.

In 2009, roughly 47% of households, or 71 million, will not owe any federal income tax, according to estimates by the nonpartisan Tax Policy Center.

Some in that group will even get additional money from the government because they qualify for refundable tax breaks.

The ranks of those whose major federal tax burdens net out at zero -- or less -- is on the rise. The center's original 2009 estimate was 38%. That was before enactment in February of the $787 billion economic recovery package, which included a host of new or expanded tax breaks.

The issue doesn't get a lot of attention even as lawmakers debate how to pay for policy initiatives like health reform, whether to extend the Bush tax cuts and how to reduce the deficit.

The vast majority of households making up to $30,000 fall into the category, as do nearly half of all households making between $30,000 and $40,000.

As you move up the income scale the percentages drop.

Nearly 22% of those making between $50,000 and $75,000 end up with no federal income tax liability or negative liability as do 9% of households with incomes between $75,000 and $100,000.

Of course, income taxes don't tell the whole story. Workers are also subject to payroll taxes, which support Social Security and Medicare.

When considering federal income taxes in combination with payroll taxes, the percent of households with a net liability of zero or less is estimated to be 24% this year, according to the Tax Policy Center's estimates.

A key reason why there is a zero-liability group at all is because the U.S. tax system is progressive. Those who bring in more money pay more than those lower down the income scale to support government functions such as national defense and social safety nets like Medicaid for those in need. That progressivity can be dialed up or down.

"Some think it's too progressive. Some don't think it's progressive enough," said Roberton Williams, a senior fellow at the center.

President Obama falls into the latter camp. He has proposed increasing the income tax burden on families making more than $250,000 and individuals making more than $200,000, while offering new measures to reduce the tax bite for most Americans making less.

One of Obama's proposals is to extend the 2001 and 2003 Bush tax cuts for everyone except high-income tax filers, which was the group that derived the most benefit from those cuts.

As a result, under Obama's budget, he would keep the ranks of the non-payers higher than they would otherwise be.
Why the tax-free matter

The question of who pays and who doesn't is not a trivial matter. But Washington policymakers are not dealing with it in an explicit way.

And that's a problem, given the country's fiscal outlook.

If asked to vote up or down on whether they are comfortable with such a large group of voters contributing no federal income tax or payroll tax revenue, the majority may well decide it is appropriate given the means of the households involved. Or they may decide that it's not.

Either way, that decision should inform the debate about the many costly policies and deficit-reduction strategies that lawmakers will be grappling with for years to come.

"As the number [of nonpayers] becomes larger, we have to question whether we'll make good decisions about how to allocate resources," economist George Zodrow, a professor at Rice University. "Most people don't understand how skewed the tax distribution is."

Experts say that to pay for all the things on the country's growing tab, the money can't just come from a shrunken pool of taxpayers.

"Over the long run, you'll have to have a broader base," Zodrow said.

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Why do we always revert back to point of taxation? Here's your assignment Nonstop, cause I don't have the time and frankly, I'm too lazy. Find out what the fiscal note on repealing the IRS individual income tax code is. Then figure out what percentagage of sales tax it would take not only to make it fiscally neutral, but to start to pay off the national debt and how long it would take to pay off that debt.

Then we could maybe start to seriously discuss this. Until then, I call BS that it is even possible to replace individual with sales tax. You might get your national sales tax, right along side your individual tax.

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That's what I'm scared of, Dakota. I think the first part of this discussion unfortunately is going to be ways to cut spending.

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I was pissed when I read that article the other day. Half of americans have no income tax obligations, but Joe Single making 20 grand a year owes 4 grand between state and federal. Guess I'd better get married and have kids.

When an individual dies with a negative net worth (debts greater than assets), who loses? Best answer: his creditors. They get less than they contracted for.

(Some will say "heirs" lose, too, but it's a different kind of loss. You can only be an heir after the other person is dead and has left assets greater than debts. An heir loses something hoped for, but a creditor loses something contracted for.)

Debt financing is not bad per se. Debt financing is bad when the person borrows more than can be paid back before he dies on terms agreeable to the creditor at time of borrowing.

The longer the creditor thinks you're going to live, the more they'll be willing to lend you.

For example, I *used* to argue that heavy borrowing for a college education made sense even if it meant the borrower had a negative net worth for several years after graduation. (I don't argue that anymore, but not because it makes the student a net borrower, only because I no longer believe that college educations give the value they used to.)

Which brings me to the case of governments who borrow great amounts. A government of a stable and productive country can maintain a bigger debt in percentage terms than an individual can for one simple reason: the country has a longer life span than the individual does.

My favorite example in class for the longest time was Britain circa 1815. Britain's government had run up an incredible debt. (I don't have the numbers at hand, but it was somewhere between 200 and 300% of annual GDP: in today's terms, that's like the USA federal government running accumulated deficits of between $30 and $40 trillion.)

And trust me, little as I like Obama, Chicago-style politics, and American politicians in general, they are pikers corruption-wise compared to the domestic "politics" of the English ruling class c. 1750-1815.

And on top of that domestic corruption, Britain had to deal with rebellion (us), Napoleon's imperial dreams (heckuva lot more expensive than Osama and Saddam combined), and the general drain that its empire put on its economy (some Brits got very rich from empire; the country as a whole paid through the nose to maintain that empire).

What saved Britain was the rising economic wealth that industrialization brought it. That and the fact that it was, despite all the political unrest and reform that the system underwent over the 19th century, a quite stable society and polity.

What saved Britain was not that the sun never set on the British empire (because it eventually did), but that Britain itself (its people AND its ability to maintain a stable governing structure of monarch/Parliament/local govt looked in the eyes of most of its creditors as it would live forever. (And in fact, still does.)

I don't like trillion dollar annual deficits. But it isn't because I think it's bad to borrow a trillion dollars. It's because I don't think the borrower -- the US government -- is credit-worthy to that extent.

The American economy, recession and all, can generate income of close to $14 trillion/year. If you have income of 14 trillion, you can stand to borrow a crapload.

America isn't bankrupt. Any more than Britain was bankrupt in 1815.

Only its government is bankrupt.

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I'm married and got screwed this year. Not only get married, but have kids.. And alot of them. So your overpopulating the nation, who cares. At least you get some tax breaks... :roll:

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We should go China on these people.