Another thorn in the “our economy is improving!” theory has breached the surface, shedding a light on the economic realities faced by many Americans.
A surprising 45.3 percent of American households don’t pay federal individual income tax – that according to a 2015 report from the Tax Policy Center, a joint venture of the Urban Institute and Brookings Institution based out of Washington.
Source: MarketWatch
That 45.3 percent equates to roughly 77.5 million households exempt from federal individual income taxes. This is mostly due to tax breaks or simply not having taxable income, explains Roberton Williams, a senior fellow at the Tax Policy Center as told to MarketWatch.
Through Rose-Colored Lenses
While some are eager to politicize this issue and point the finger of blame, this data points to underlying economic struggles as evidenced by a slack labor market and sluggish wage growth. Truth is, our economy still has a long way to go.
Case in point: Almost half of Americans are exempt from paying federal income taxes, suggesting that a significant portion of them are still struggling to find steady employment. As for employed Americans, many are working dead-end jobs, for which they are overqualified, and earning hourly wages that haven’t budged since the 1990s.
Look at Talia Jane, the former Yelp employee who recently penned a controversial open letter to her boss that chronicled her brushes with poverty while living in San Francisco on a minimum-wage salary. While Jane, a college graduate, is employed full-time with benefits, she is by no means flourishing economically or living a comfortable lifestyle.
Jane’s viral story painted a bleak but very realistic picture of the economic realities faced by many college-educated, underemployed Americans in search of the life they believe their $80,000 diploma entitles them.
“[Talia’s] letter went viral because of the bigger issues it highlighted,” said Vox’s Tara Golshan. “College-educated students are increasingly coming out of school with higher levels of debt — affecting middle-class minorities the hardest — and entry-level incomes in certain fields have barely moved in decades.”
While statistically the economy may look stable, the reality is a lot less rosy. The fact that the federal tax base is so narrow can be attributed to these unemployed, underemployed and underpaid American workers that make up such a large percentage of our population.
Our Take
If this report tells us anything, it’s that we need stronger, more meaningful economic growth to involve more people in the economy.
This challenge is all the more difficult due to the growing pains we’re experiencing as we transition into the new tech-centric digital economy. In order to get American workers in these new economy jobs, we need an overhauled education system and legislation that fosters growth from the new economy’s leading firms.
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