A Rant Against Welfare Doublespeak: What is “Negative Income”?

How many use the term "negative savings" in their quarterly reports? Would that fly with the CFO?

The CBO (Congressional Budget Office) is struggling with their use of words, trying very hard to not use the term "welfare" in its new report on taxes paid to and funds received from the Feds in the fiscal year of 2010.

Take a look at page 12 in the report and note the use of the term "negative income," which is normally used to identify a business or personal loss and the related tax write-off. As an example, the IRS uses it when it comes to "excess deductions.”

Here is the SBO definition: "A group can have a negative income tax rate if its refundable tax credits exceed the income tax otherwise owed." Read that again, slowly. Pay attention to "refundable tax credits" - what does that actually mean?


  • Refund – to give back, especially money; return or repay
  • Tax – a compulsory financial contribution imposed by a government
  • Credit – the positive balance or amount remaining in a person's account

So, in order to have a credit, you need to first have paid too much, and then the excess amount will be returned to you - i.e. the refund. On the other hand, if you don't owe anything, you don't have to pay anything, which means there's no excess balance to return. Simple, right? My 11-year-old daughter would understand this, and probably my 7-year-old daughter would, too (she's a good reader). Since the first part is syntactical rubbish, the "exceed the income tax otherwise owed" portion can be ignored. It makes the whole sentence even worse.

There are more problems with the CBO's command of English - take “income” for example. For most of us it is neither "received" nor "distributed" - it is actually earned. At least outside the Beltway.

For those interested in hard numbers, the households in the bottom 40% received (correct usage in this context) an average of $18,950 in what the CBO calls “government transfers” in 2010.

Conversely, this creates a nasty scenario where the top 40% of households (measured by their before-tax income) actually paid 106.2% of the nation’s net income taxes in 2010!

Regardless of how you view the political aspect of the majority (the lower 60%) successfully being able to force the minority (the top 40%) to net-net pay all federal taxes. I think we can agree that it would be better to not play around with words and their definitions.

Let's face it, welfare is welfare, no matter what you prefer to call it. Sometimes it is needed, but let's be honest with the terminology.

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