It’s certainly not uncommon for people to fall on hard times occasionally and need to claim welfare. It can happen to the best of us.
But if yourself and your family have never been on welfare before, you may well wonder what this means for their taxes, and be curious whether their income is considered for taxation.
That’s exactly what this short article is going to uncover for you.
This article, however, is not going to get too political about whether people on welfare should or should not be taxed, and instead we will simply provide an explanation of the status quo.
We will also endeavor to answer some of your most frequently asked questions along the way. Please feel free to scroll ahead to any section of interest to you.
Do People On Welfare Pay Taxes?
When so many people are taxed according to their level of income, it begs the question whether welfare payments, which are also considered a form of income, are considered for tax purposes.
But, the answer is a firm and categorical No.
All forms of welfare payment are not taxable. This includes the likes of cash assistance programs, child support and social security payments. And this goes for both federal and state purposes.
Why Don’t People On Welfare Pay Taxes?
Income received as welfare is not earned income, and as such it cannot be considered for income tax purposes.
Moreover, anyone who is in receipt of welfare cash assistance payments is doing so in order to supplement a very low income. And as such, they do not earn enough to pay income taxes.
In That Case, How Are The People On Welfare Meant To File Their Taxes?
Non-taxable income is not meant to be declared when you file your taxes every year.
People on welfare don’t earn the threshold amount to pay income taxes. And as such, they can declare themselves exempt from filling out a tax return for the entire length of time that they receive such welfare benefits.
How Much Money Am I Allowed To Make Without Paying Taxes?
The minimum earned income you can make before being asked to pay income tax depends on a number of different factors…
If you are single and under the age of 65, the minimum you can earn to file taxes is $12,400 a year. But if you are filing jointly with someone, for example as a married couple, this doubles to $24,800.
Anyone on welfare has an income under this level, so does not have to pay taxes or file a tax return.
What Percentage Of Tax Goes To Welfare?
Welfare programs are typically funded through taxation. And it’s no secret that welfare spending is the largest item in the federal budget, at circa 21%.
Approximately one trillion dollars is set aside each year for various welfare programs, of which there are many.
These welfare programs are provided for less than 10 percent of Americans, however. Which really puts into perspective the degree of need among the poorest among us.
Does It Harm The Country And The Country’s Economy If Too Many People Are On Welfare?
The great thing about welfare is that it can really lift people out of poverty…
There is much empirical evidence to suggest that welfare programs that provide financial assistance to those who need it most considerably reduce poverty in countries where the welfare state makes up at least a fifth of GDP.
But there are some that raise concerns, fearing that being on welfare can create a feeling of dependency on the state, which could lead to people relying on welfare when they perhaps ought not to be.
No-one wants those on welfare to drain the pockets of the country. Not when we want to put our efforts into building back better.
There are those who believe that welfare benefits provide too comfortable a state of affairs. They say that many people become dependent on these benefits and are not willing to make the effort to get out of poverty.
And you can certainly see where that train of thought may come from. It certainly feels safer to have a known amount of money coming in on a regular basis. It enables you to budget according to your particular needs.
Whereas, in stark contrast, working a zero-hours contract, or freelancing as self-employed, is a big unknown. You may not know how much money you have coming in from one week to the next.
However, in a much referenced article titled “Dispelling the Myth of Welfare Dependency” by Rema Hanna in 2019, Hanna convincingly argues the case that having people being on welfare benefits does not have to be such a bad thing.
The idea behind many welfare programs these days is to be used as a springboard for moving ahead in life. And Hanna quotes several studies which look hopeful in this regard, although we will have to wait for long-term results.
Being on welfare can help would-be employees to find jobs that best match their skill sets, rather than simply settling for the first job that comes along. And this will benefit the country’s economy in the long run because it may mean they will be paying more money in the way of income tax at a later date.
Despite the levels of poverty in some parts of America, America is still one of the richest countries in the world, and can afford to help keep the poorest out of poverty.
So, people on welfare are not required to pay any taxes, and are exempt from completing tax returns while their sole income comes from welfare.
But this expenditure on welfare should be viewed as an affordable necessity rather than as a drain on the country’s economy. America is leading by example, and rightly so. When the income tax you pay helps to keep food on someone’s table, that can only be a good thing.