Federal income tax: Who doesn't pay it and why?
The 46 percent of Americans who don't pay federal income tax can be divided into those who have no taxable income and those who have enough tax breaks to wipe out their tax liability.
The 46 percent of Americans who don't pay federal income tax can be divided into those who have no taxable income and those who have enough tax breaks to wipe out their tax liability.
The percentage of Americans who don鈥檛 pay income tax is making headlines again. However, the story hasn鈥檛 changed since I聽blogged聽about it last year and my TPC colleagues and I analyzed why in a聽longer paper. In 2011, 46 percent of tax units paid no federal income tax. Half of them had no taxable income鈥攖he standard deduction and personal exemptions exceed their income.聽 The other half get enough tax breaks to wipe out their basic tax liability.
It鈥檚 worth noting that the percentage has聽changed over time, rising and falling as the economy fluctuates and Congress enacts short-term stimulus tax cuts. Looking forward, we聽project聽that the percentage will fall below 40 percent by the end of the decade, even if Congress makes the Bush-era tax cuts permanent.