44% Of Americans Won’t Pay Any Federal Income Tax

Catey Hill

April 19, 2017

Yesterday, April 18th was the deadline for filing your taxes

Many Americans discovered they don’t owe the government a dime.

More than four in 10 American households (44.3%) — or upwards of 76 million — didn’t pay any income tax to the federal government last year, according to data for 2016 from the Tax Policy Center. This year that number is expected to be roughly the same, at 43.9%.

Most of these people aren’t paying income taxes because they either don’t have any income that is taxable (many fall below the poverty line), or because they get enough tax breaks and don’t owe the government money. Common tax breaks include the child tax credit, the earned income tax credit (EITC), and the exclusion of some or all Social Security income, explains Roberton Williams of the Tax Policy Center.

Of course, this doesn’t mean that this group is completely tax exempt: “Roughly 2/3 of those paying no federal income tax work and pay federal payroll taxes that support Social Security and Medicare; about 60% of the rest are elderly and thus retired and not working; and most of the rest have very low incomes,” says Williams.

Though millionaires and billionaires not paying taxes frequently make headlines — Warren Buffett is famous for having said he has a lower tax rate than his secretary thanks in part to how investment income is taxed — the reality is that the lion’s share of federal income taxes are paid by those who are rich.

More than 31% of all federal individual income tax is paid by those who bring in more than $1 million a year, who have a net effective tax rate of 25.3%, the highest of any group. Another 14% of income tax is paid by those who make between $500,000 and $1 million, who have a 20% tax rate, the second highest.

This article was posted: Wednesday, April 19, 2017 at 8:34 am

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