Poor people -- those officially defined by the government as living in poverty -- should not have to pay federal income taxes. The near- poor should not be burdened with taxes that would pull them down into poverty.
The two propositions seem so obvious that most Americans probably think they are already a part of the tax code.
They aren't. Not only are the officially poor taxed, and many near-poor taxed into poverty: their tax burden has actually grown during the years of the Reagan tax cuts.
Don't feel bad. I didn't know it either until I read the Children's Defense Fund's new report, "The Impact of Federal Taxes on Poor Families." Mary Bourdette and Jim Weill, authors of the report, look at one working mother:
Jane Doe is a single mother with three children. In 1979, her income from her job was $8,000, a little above the federal poverty line. Jane, like most other low-income workers, had no unusual tax deductions or tax "breaks," so her federal income and Social Security taxes were $481, leaving her family with $7,519 to live on after federal taxes, still a tiny bit above the official poverty line in 1979 ($7,412 for a family of four).
And what has happened to the struggling Jane Doe since then? Inflation has increased the cost of living by 43.2 percent, but, luckily, her income also has increased by 43.2 percent, so that her 1984 income was $11,456.
But she didn't break even. Besides losing some of her government-paid benefits to the Reagan budget cuts, she also saw her federal taxes increase by nearly 300 percent -- from $481 to $1,384 -- so that instead of being a little bit above the poverty line after taxes, she wound up below the poverty level, which by then was $10,613.
What happened to Jane Doe's and millions of other low-income families was probably more the result of oversight and neglect than of conscious design. To begin with, there was the increase in the amount of earnings on which Social Security taxes are paid, to the point where even poverty-level wages required the payment of $743 in Social Security taxes in 1984. In addition, inflation drove up the wages on which the poor are taxed without any compensating adjustments. The personal exemption, for instance, remains at $1,000 per person, and the standard deduction -- crucial to taxpayers who (like nearly all poor families) do not itemize their deductions -- also went unchanged.
The result is that even those poor families whose wages kept abreast of inflation lost enough spending power to more than offset the effect of a cut in tax rates, in effect shifting the tax burden away from the well-off (who did benefit from the tax cuts) to the poor. Between 1980 and 1982, the study notes, the "aggregate federal taxes paid by poor families increased by 58 percent . . . while taxes on the well-to-do and on profitable corporations declined dramatically."
The study points out what too many of us have not understood: that there is no automatic link between the poverty line and the tax tables. It is true that in the late 1970s, poor people paid little or no income tax. But this was because, between 1975 and 1980, the threshold at which a family became liable for taxes was higher than the poverty line. By 1981, the tax threshold had dropped below the poverty line, and the gap has been growing since then.
The study examines the current tax reform proposals and makes some sensible recommendations for reversing the damage the poor have suffered in recent years. But its chief value is in its clear statement of the increased tax burden on the poor in the past four years.
Even in these cynical times, when everybody is fighting to save his favorite tax break, most Americans would acknowledge that it makes no sense -- politically, morally or in terms of elemental fairness -- to impose an income tax on those we define officially as already in poverty.