Half of Americans pay no taxes?

You’ve probably heard that a lot from the Republicans and their colleagues in the media. It’s a disingenuous statement. As they well know, most Americans pay taxes in many forms to many different entities. They pay Social Security taxes, Medicare taxes, sales taxes, property taxes, state income taxes, estate taxes, gasoline taxes, cigarette and liquor taxes and probably more I can’t think of at the moment. What they don’t pay is federal income taxes.

How can this be, you say, wide-eyed in your horror?

Because they don’t make enough money to have a federal income tax liability!

Here’s Donald Marron, quoting the Tax Policy Center:

My Tax Policy Center colleagues estimate, for example, that 46% of households either will pay no federal income tax in 2011 or will receive more from the IRS than they pay in.

Today, TPC released a new study (.pdf) that examines why these people end up paying no federal income tax.

The number one reason should come as no surprise. It’s because they have low incomes. As my colleague Bob Williams notes:

A couple with two children earning less than $26,400 will pay no federal income tax this year because their $11,600 standard deduction and four exemptions of $3,700 each reduce their taxable income to zero. The basic structure of the income tax simply exempts subsistence levels of income from tax.

Low incomes (or, if you prefer, the standard deduction and personal exemptions) account for fully half of the people who pay no federal income tax.

Reasons two and three? Senior citizens receive Social Security benefits, which are exempt from federal income tax. That’s another twenty-two percent of the people who don’t pay any. The remaining fifteen percent get exemptions like the Earned Income Tax Credit, child credit, and childcare credit.

Presto! Roughly 46 percent of Americans pay no federal income tax for perfectly sensible reasons. They’re not defrauding the government, they’re not getting a free ride on the backs of the rest of us; no, they’re mostly too damned poor to have any income taxes to pay.

Next time you hear a misguided soul spout that nonsense, you can fire back with facts.

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