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"Who Pays No Income Tax?" A Look at the Original Source from 2009
The Bottom Line: The highest income households do best.
"... 18,000 were households taking in more than $500,000 -- and of those, 4,000 made more than $1 million..." http://money.cnn.com/2011/05/09/pf/taxes/millionaires_income_tax/index.htm?iid=EL
Who Pays No Income Tax?
By Roberton Williams
During the 2008 election campaign, President Obama proposed to create or expand a variety of refundable tax credits, most notably his Making Work Pay credit. Refundability was key for Obama — that’s the only way to make credits available to people who pay little or no tax. Critics decried the proposals, asking how you can cut taxes for people who pay no tax. The Tax Policy Center (TPC) estimated that, under then current law, 38 percent of all nondependent tax units would pay no income tax in 2009.
Earlier this year, Obama signed into law the American Recovery and Reinvestment Tax Act of 2009 (P.L. 111-5),
which, among other things, temporarily put into place some of the refundable credits proposed during the
campaign. TPC estimates that under the new law, 47 percent of tax units will owe no income tax in 2009 (see
table).
The fraction of tax units paying no income tax varies widely by filing status and type of unit. About 47 percent
of single filers will owe no tax, compared with 38 percent of joint filers and 72 percent of heads of household. More
than half of elderly tax units and tax units with children will pay no income tax this year. Differences in income explain much of that variation.
Single people and heads of household have average income under $30,000 while married couples filing jointly have income averaging nearly $75,000. More than 60 percent of units with income between $20,000 and $30,000 pay no income tax, compared with only about 20 percent of those between $50,000 and $75,000. Filing status matters too, largely because of differences by filing status in exclusions, deductions, and credits, and in the presence of children. More than three-fourths of joint filers and heads of household with income between $30,000 and $40,000 pay no tax compared with just one-sixth of single tax units in that income range. And almost 90 percent of units with children in that income category pay no tax, reflecting, in part, the value of the earned income and child tax credits.
~snip~
http://www.taxpolicycenter.org/UploadedPDF/1001289_who_pays.pdf
By Roberton Williams
During the 2008 election campaign, President Obama proposed to create or expand a variety of refundable tax credits, most notably his Making Work Pay credit. Refundability was key for Obama — that’s the only way to make credits available to people who pay little or no tax. Critics decried the proposals, asking how you can cut taxes for people who pay no tax. The Tax Policy Center (TPC) estimated that, under then current law, 38 percent of all nondependent tax units would pay no income tax in 2009.
Earlier this year, Obama signed into law the American Recovery and Reinvestment Tax Act of 2009 (P.L. 111-5),
which, among other things, temporarily put into place some of the refundable credits proposed during the
campaign. TPC estimates that under the new law, 47 percent of tax units will owe no income tax in 2009 (see
table).
The fraction of tax units paying no income tax varies widely by filing status and type of unit. About 47 percent
of single filers will owe no tax, compared with 38 percent of joint filers and 72 percent of heads of household. More
than half of elderly tax units and tax units with children will pay no income tax this year. Differences in income explain much of that variation.
Single people and heads of household have average income under $30,000 while married couples filing jointly have income averaging nearly $75,000. More than 60 percent of units with income between $20,000 and $30,000 pay no income tax, compared with only about 20 percent of those between $50,000 and $75,000. Filing status matters too, largely because of differences by filing status in exclusions, deductions, and credits, and in the presence of children. More than three-fourths of joint filers and heads of household with income between $30,000 and $40,000 pay no tax compared with just one-sixth of single tax units in that income range. And almost 90 percent of units with children in that income category pay no tax, reflecting, in part, the value of the earned income and child tax credits.
~snip~
Go to the link to review the table that shows Percentage of Tax Units with Zero or Negative Individual Income Tax Liability By Filing Status and Cash Income Level: http://www.taxpolicycenter.org/UploadedPDF/1001289_who_pays.pdf
A couple of observations: From the table we see that 46.7% of single filers pay no income tax. We also see 46.9% of all tax units* pay no income tax. Both of these figures include high wage earners (see the table at the above link), and based on the definition of tax unit below, this is not exactly the same as thing as saying "47 percent of Americans don't pay income tax."
* From the FAQ at their website:
The TPC's distribution tables show the impact on "tax units". What is a tax unit; is it the same as a family or a household?
A tax unit is an individual, or a married couple who file a tax return jointly, along with all dependents of that individual or married couple. A tax unit is therefore different than a family or a household in certain situations. For example, two persons cohabiting would be considered one household but if they were not legally married, they would file separate tax returns and thus be considered two tax units. A family could consist of a married couple and the wife's elderly mother who lives with them. That family would be considered two tax units since, if the elderly mother had a large enough income, she would be required to file a federal income tax return on her own. Thus the number of tax units will tend to be larger than the number of families or households reported elsewhere.
A tax unit is an individual, or a married couple who file a tax return jointly, along with all dependents of that individual or married couple. A tax unit is therefore different than a family or a household in certain situations. For example, two persons cohabiting would be considered one household but if they were not legally married, they would file separate tax returns and thus be considered two tax units. A family could consist of a married couple and the wife's elderly mother who lives with them. That family would be considered two tax units since, if the elderly mother had a large enough income, she would be required to file a federal income tax return on her own. Thus the number of tax units will tend to be larger than the number of families or households reported elsewhere.
Further, according to one colleague from the Tax Policy Center, who apparently has been trying to correct the message and the way this information has been used erroneously:
Who Pays No Income Tax? It is the Wrong Question
Would you rather get a tax cut of $1,000 or $1.4 million? I thought so.
Would you change your answer if taking the smaller tax cut allowed you to avoid paying income tax entirely?
That is exactly the focus of the endless squabble over the half of American households who pay no federal income tax. This factoid has become a source of outrage for anti-taxers ever since they got wind of some estimates by my Tax Policy Center colleagues.
But framing the debate as being about who pays tax and who doesn’t misses the point. The question we should be asking is who benefits most from more than $1 trillion in tax preferences that litter the tax code. And the answer is clear: While nearly everyone takes advantage of these breaks, the highest income households do best—by far—even though they are still likely paying some tax after taking those deductions and exclusions.
~snip~
http://taxvox.taxpolicycenter.org/2011/05/05/who-pays-no-income-tax-it-is-the-wrong-question/
Would you rather get a tax cut of $1,000 or $1.4 million? I thought so.
Would you change your answer if taking the smaller tax cut allowed you to avoid paying income tax entirely?
That is exactly the focus of the endless squabble over the half of American households who pay no federal income tax. This factoid has become a source of outrage for anti-taxers ever since they got wind of some estimates by my Tax Policy Center colleagues.
But framing the debate as being about who pays tax and who doesn’t misses the point. The question we should be asking is who benefits most from more than $1 trillion in tax preferences that litter the tax code. And the answer is clear: While nearly everyone takes advantage of these breaks, the highest income households do best—by far—even though they are still likely paying some tax after taking those deductions and exclusions.
~snip~
MORE CURRENT TABLE, visit: http://www.taxpolicycenter.org/numbers/displayatab.cfm?DocID=3054
As you can see, the 46.4 percent is Tax Units with Zero or Negative Individual Income Tax as a Percent of all tax units:
