In 2009, roughly 47% of households, or 71 million, will not owe any federal income tax, according to estimates by the nonpartisan Tax Policy Center.
Some in that group will even get additional money from the government because they qualify for refundable tax breaks.
The ranks of those whose major federal tax burdens net out at zero -- or less -- is on the rise. The center's original 2009 estimate was 38%. That was before enactment in February of the $787 billion economic recovery package, which included a host of new or expanded tax breaks...
The vast majority of households making up to $30,000 fall into the category, as do nearly half of all households making between $30,000 and $40,000...
Of course, income taxes don't tell the whole story. Workers are also subject to payroll taxes, which support Social Security and Medicare.
When considering federal income taxes in combination with payroll taxes, the percent of households with a net liability of zero or less is estimated to be 24% this year, according to the Tax Policy Center's estimates...
A key reason why there is a zero-liability group at all is because the U.S. tax system is progressive. Those who bring in more money pay more than those lower down the income scale to support government functions such as national defense and social safety nets like Medicaid for those in need. That progressivity can be dialed up or down.
"Some think it's too progressive. Some don't think it's progressive enough," said Roberton Williams, a senior fellow at the center...
Experts say that to pay for all the things on the country's growing tab, the money can't just come from a shrunken pool of taxpayers.
"Over the long run, you'll have to have a broader base," Zodrow said.
04 October 2009
47% of U.S. households owe no Federal income tax
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It is one of the things that I have always found absolutely stunning about our tax system. I have always thought that unless you are absolutely destitute you should pay *something* (1%, $1, something?) in taxes just as a matter of membership in the civil society. If you look at European countries with high amounts of government spending (social and otherwise) they usually compensate for that with high taxes (VAT anyone?). We seem to be developing a society that demands huge government spending and low taxes... which should be obviously unsustainable
ReplyDeleteSometime around 1970, when I was first teaching East Asian languages and literatures at Indiana University, pulling down a nifty $8,000 or so a year, both Gulf Oil and Mobil Oil paid less in corporate income taxes than I did in personal income taxes according to press reports, as I recall.
ReplyDeleteWhat exactly does the article mean by "owe no federal tax"? There's a difference between owing no tax on your federal return and not paying tax - if you're paid on a W-2, federal tax comes out of every paycheck. The statistic probably means that 47% of US taxpayers owe no tax on their federal tax return above what they've already paid in throughout the year, but the article makes it sound as if 47% pay no taxes. It would be interesting to see just how distorted this number is - I suspect significantly.
ReplyDeleteGood point. I've changed the title of the post from "pay" to "owe."
ReplyDeleteIf you read the whole article, it is apparent they are talking about total income tax for the year. In other words, if any of those 47% paid income tax on their W-2s, they'll get it all refunded at the end of the year.
ReplyDeleteOf course, they still have to pay Social Security and Medicare, since those are taxed on earnings, with no deductions allowed.
Maybe. But I don't trust articles - I'd like to see the primary data, and I didn't have any success with a quick search.
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