Tax Code Insanity: Couple Living Below Poverty Line Faces Higher Tax Rate Than Romney   4 comments

When tax time rolled around in April, my partner and I had zero income and were facing homelessness, so asking for an extension was a no-brainer. We were hoping we’d be in a better financial position in October. What else could we do?

We are indeed both working now. In fact, we work so many hours a week we almost never see each other and rarely have time for anything beyond working, sleeping and eating. Which is also why I haven’t been blogging. No time. It’s a pretty miserable existence. It’s also a precarious existence.

Since we’re both classified as independent contractors, we don’t qualify for the minimum wage, overtime, workers comp, health insurance, or unemployment benefits. And we can lose what little we have at the drop of a hat.

Despite this, we are doing better now than we have been in a while. As long as my partner puts in at least 72 hours a week and I work 30-40 on top of the uncompensated work I do around the house and taking care of the dogs, we can usually cover our rent, food, and bills. Unfortunately there’s nothing left over to see a dentist or buy a winter coat, and the only reason our beloved Balou is still hanging in there is that some kind, compassionate people are paying for his meds.

Knowing that we would have to pay our taxes in October, I’ve been taking on more work than I can handle, getting myself into trouble with deadlines and exhaustion from lack of sleep. My partner has also been surviving on as little as 2-3 hours of sleep many nights in order to push his working hours up to top 80. Stress and extreme fatigue triggered a couple of epic fights and my partner almost had an accident due to exhaustion, but in the end we had accumulated an extra $620. Our previous tax bill had been just over $400, and while we made less money in 2011 than in 2010, we knew we’d be paying more in taxes. We thought we needed to make another $200 and we’d be okay.

We were wrong. Very wrong.

Our combined household income for 2011 was $14,100, which puts us well below the federal poverty line (that would be $15,130 for a family of two). Like many people unable to find employment, we’d been selling our skills as freelancers in order to scrape by. And that means we’re considered self-employed and subject to a whopping 15.3% self-employment tax!

2011 was particularly bad for us, not just because of our very low income but because the Obama administration replaced the Making Work Pay credit that helped ALL middle and low income earners with the Payroll Tax Holiday that does absolutely nothing for the almost one in three Americans now toiling as freelancers, independent contractors, and small business owners. What the hell were they thinking? Middle class workers with good salaries and benefits get a break and poor contract workers with no benefits and poverty-level pay get nothing. Thanks a lot, Obama.

As a result, a family so poor we frequently didn’t have enough to eat and went to sleep hungry (on the floor, because no furniture) now owes the IRS over $1,800 (!) in taxes. Where are people who made just $14k during the whole year supposed to get that kind of money?

And sure, we’re part of the 47% (46% really) who don’t pay federal income tax. In fact, we owe negative income taxes. Unfortunately that has absolutely no effect on our self-employment tax liability. We still owe 15.3% of our total income in taxes. That’s more than billionaire Romney paid. But even as our underpaid labor subsidizes the wealth of the middle and upper classes, people like Romney and Ryan have the gall to call us “takers.” Incredible!

Obviously there is something seriously wrong with a tax code that has people below the poverty line paying a higher tax rate than billionaires. Fixing it, however, doesn’t just involve making millionaires and billionaires pay more; it’s even more important to wipe out the tax liabilities of workers who don’t even earn enough to cover their basic living expenses.

But wait, you say, isn’t that what the Earned Income Tax Credit is supposed to do? The EITC can indeed be very helpful–if you have dependent children. If we had even one child, we would be getting a refund instead of a $1,800+ tax bill. But for those of us who have failed in their duty to reproduce (or whose kids are grown), the EITC doesn’t amount to much. Last year, our EITC came to exactly $1. I kid you not. This year, it’s a couple of hundred dollars. Not remotely enough to make a dent in our humongous tax bill (which would top $2k without the EITC).

As with most other benefits (cash assistance/TANF, Medicaid, housing assistance, etc.), poor people without dependent children aren’t viewed as deserving help. That’s because poor adults are considered responsible for their poverty in a way that kids aren’t. Most people believe that poor kids deserve at least some assistance; after all, they didn’t ask to be poor (unlike the adults who were totally signing up for the chance to be impoverished). And since kids suffer when their parents suffer, well, we have no choice but to help the parents too. No kids? You’re on your own. That’s America’s “safety net” in action.

I have been in tears all day. It seems like no matter what we do, no matter how hard we work, we can never get ahead. Every time we’ve saved a little money, something comes along and gobbles it all up.

Honestly, I’m still having trouble wrapping my head around this. How can people living below the poverty line be expected to cough up over $1,800 in taxes? Where is that money supposed to come from?

Haven’t felt so completely demoralized in a long time.

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4 responses to “Tax Code Insanity: Couple Living Below Poverty Line Faces Higher Tax Rate Than Romney

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  1. I know this situation almost perfectly. My fiance and I are lucky enough to have found people who let us rent in their home for 600 a month, with furniture, use of kitchen utensils, and our own bathroom. We even have the luxury of a new kitten in our home. We are both full-time students, with me working as a part-time cashier and him still looking for new work. While we have food stamps and I have medical assistance, my fiance with asthma has no insurance for his inhalers or a chance of seeing a therapist (he has Asperger’s syndrome and depression). The importance of my work has made me consider cancelling my upcoming therapy, and our food stamps can’t cover healthy eating. It’s often tiring to see the faces of people looking at us in disdain because we have a bag of chips in the cart and a thing of soda. We’re wasting our tax dollars on junk food! If only we could actually afford to eat good. I try and get bananas, grapes, salads every week. We simply can’t afford food that’s good for us. Payroll taxes is my problem, honestly. I do believe I should contribute to certain things; social security, medicare. But I don’t feel like I should be paying two taxes to my city for the school and the PRIVILEGE to work there.

  2. I’m in the same boat as well… the amount we “owe” is always like 2-6 months groceries/necessities for us, which we can barely buy in the first place since we’re way under the FPL for two people. How in the world can this even be possible? Ridiculous.

    • I have tried bringing this to the attention of various politicians, including Barbara Boxer, Bernie Sanders and Alan Grayson–no one gives a damn.

      Back when my partner and I had been working full-time for the same employer for over a year (i.e., before the most recent round of lay-offs), we met with a loan officer at the bank to see what it would take to get approved for a mortgage. While home prices have gone up considerably in the last 1 1/2 years, mortgage payments on a little house with a couple of acres of desert land are still way less than the cheapest rent. We were concerned that our status as independent contractors would be a problem but the woman at the bank said virtually everyone around here is classified as an independent contractor/self-employed, so that’s not an issue. She was optimistic about us qualifying for an FHA loan except for one thing: We’d have to pay our back taxes before she could process our mortgage application. Of course we owe the IRS thousands from the years we spent below the FPL, so there was no way that was going to happen. In other words, the tax code ensures that short of a lottery win, we’ll be forever stuck paying rent.

      • That’s just awful! Hopefully someone will pay attention and actually DO something about it. At least the making work pay credit helped some so just putting that back would be better than nothing lol. I wonder if change.org would help?

        I remember being SOOO mad because my hubby worked with a guy who made $35,000 as an independent contractor (neither made payments during the year) which was more than triple what we made that year, but because he had 3 kids he still got like $6,000+ back and we had to pay $1,000. Wth? I know it’s more expensive to have kids, but there shouldn’t have been THAT much of a difference (especially considering how much more than us he made to begin with) and he also got almost as much as we made in that year in food stamps/assistance and we didn’t. We were a few thousand dollars under the poverty level that year and he was several thousand above it for his family size (not counting the assistance), so if he gets back that much, at the very least we should break even and not have to pay $1,000! Something is obviously seriously wrong!

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