NCPA - National Center for Policy Analysis


October 5, 2009

Most people think they pay too much to Uncle Sam, but for some people it simply is not true, says

For example:

  • In 2009, roughly 47 percent of households, or 71 million, will not owe any federal income tax, according to estimates by the nonpartisan Tax Policy Center.
  • When considering federal income taxes in combination with payroll taxes, the percent of households with a net liability of zero or less is estimated to be 24 percent this year, according to the Tax Policy Center's estimates.

The ranks of those whose major federal tax burdens net out at zero -- or less -- is on the rise, says

  • The center's original 2009 estimate was 38 percent; that was before enactment in February of the $787 billion economic recovery package, which included a host of new or expanded tax breaks.
  • The vast majority of households making up to $30,000 fall into the category, as do nearly half of all households making between $30,000 and $40,000.
  • Nearly 22 percent of those making between $50,000 and $75,000 end up with no federal income tax liability or negative liability as do 9 percent of households with incomes between $75,000 and $100,000.

A key reason why there is a zero-liability group at all is because the U.S. tax system is progressive.  Those who bring in more money pay more than those lower down the income scale to support government functions.  President Obama thinks the tax system is not progressive enough, says

  • He has proposed increasing the income tax burden on families making more than $250,000 and individuals making more than $200,000, while offering new measures to reduce the tax bite for most Americans making less.
  • One of Obama's proposals is to extend the 2001 and 2003 Bush tax cuts for everyone except high-income tax filers, which was the group that derived the most benefit from those cuts.
  • As a result, under Obama's budget, he would keep the ranks of the non-payers higher than they would otherwise be.

Experts say that to pay for all the things on the country's growing tab, the money can't just come from a shrunken pool of taxpayers, says

Source: Jeanne Sahadi, "47% Will Pay No Federal Income Tax,", September 30, 2009.

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