Thanks to an improving economy and expiring tax cuts, 43% of U.S. households will not have to pay federal income taxes this year, according to the non-partisan Tax Policy Center. That number is lower than Mitt Romney‘s 47%, which he stated last year during his presidential campaign.
“Many people who pay no income tax simply have too little income to owe tax. The rest benefit from the tax code‘s many preferences — exclusions, deductions, exemptions, and credits — that zero out the tax they would otherwise pay,” said Roberton Williams of the Tax Policy Center.
The zero income tax liability is not evenly distributed through income levels. The majority, nearly 67%, have incomes below $30,000.
Specifically, “an estimated 798,000 households in the nonpayer group make between $100,000 and $200,000 a year; 48,000 have incomes between $200,000 and $500,000; 3,000 make between $500,000 and $1 million; and 1,000 households bring in more than $1 million.”
Of the 43%, some of those will still have to pay other taxes. Only 14% of those families pay neither income taxes nor payroll taxes. And of that share, about 10% are elderly, 3% earnings less than $20,000, and 1% are not elderly or poor, likely taking advantage of tax breaks offered through deductions, exclusions and other tax exemptions. Also don’t forget that anyone buying gas, tobacco, alcohol and airfare has to pay federal excise taxes, says Williams: “It’s hard to imagine a situation where someone doesn’t pay any tax at all.”
The Tax Policy Center estimates the percentage of households without federal income tax liability will continue to drop, falling as low as 34% of households by 2024. This number will continue to drop because more Americans are working and making more money, pushing them out of the group of workers who don’t make enough money to be required to file a tax return
In 2010, half of the American population paid no federal income tax. Some take that statistic and say that our nation is one of makers and takers, with the “makers paying the taxes that support the takers.” With the help of the Urban Institute, this video explains who doesn’t pay income taxes and why, and like stated above, it notes that the share of non-payers is headed down to just a third a decade from now.
- Breaking Down the 47% (joyoftaxlaw.com)
- 2012 Tax Filing Season Begins: Changes, Highlights, and Must-Knows for Taxpayers (joyoftaxlaw.com)
- 43% pay no federal income taxes (localnews8.com)
- The famous “47 percent” are now down to 43 percent (washingtonpost.com)
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