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.
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.
Reader Comments
Absent the fall of the gov't, whether, for example, via large meteor strike on DC or via popular uprising, we are stuck with the income tax for the foreseeable future.
I agree that the most effective (legal) means of trying to keep a lid on gov't excesses is to "starve the beast" by incurring as small a tax liability as one is able. While many of us are doing so in one way or another, the numbers are still far from the critical mass required to rein in the out-of-control gov't.
We are already at the point where a large fraction of the population is merely voting to get for themselves money that the gov't has obtained from others.
It is about the principle that those contributing resources to any endeavor should have more say about the direction of the endeavor than those who do not. This applies to virtually everything - e.g., charities, community organizations, non-profits, businesses, etc., etc. I suggest that gov't should not be treated any differently in this regard. The difference is that the contribution of resources to the non-gov't entities is entirely voluntary in that if one does not agree with the way the resources are expended one is free to not contribute, while gov't forces the contributions via threat of violence.
Even a family situation is somewhat analogous. If the minor, non-financially-contributing children were given a say about family expenditures, the two bread-winning parents could be forced to spend the bulk of their earnings on toys and candy.
It all depends on the contribution. If it's purely a financial contribution in taxes that determines the weight of a persons' voice, then 90% of the worlds population need to shut the hell up. What about community commitment, resources are time and experience, not just money. Those who are the poorest see the effect of bad government spending, priorities all over the place....these are sometimes the very people that gov't need to listen to. A well governed country should not need charities. A well governed country makes sure that big business pays it's fair share. And a well governed country does not need NGOs'...organisations that by their very definition separate themselves from a governance for whatever reason...there should be no need for that if the job is being done properly.
Your way, IMO, is where we are at right now, and it's not working.