But because of tax breaks for seniors and inducements for work and raising children, among other accumulated changes to the tax code, many manage to avoid income taxes altogether. The nonpartisan Tax Policy Center in July pegged that number at 46% of U.S. households for this year.
You know how most of these people “manage to avoid income taxes”? By being poor.
Even stated accurately, you might be wondering how it is that so many people end up not paying any federal income tax. Today the Tax Policy Center has the answer for you. In 2011 they estimate that 46% of Americans will pay no federal income tax. Donald Marron breaks this down:
• 23% pay nothing because they’re poor. A couple making less than $19,000, for example, doesn’t owe anything after their $11,600 standard deduction and two exemptions of $3,700 each reduce their taxable income to zero. As Bob Williamson puts it, “The basic structure of the income tax simply exempts subsistence levels of income from tax.”
• 10% are elderly and pay nothing because their Social Security benefits are exempt from federal income taxes.
• 7% pay nothing thanks to provisions in the tax code designed to benefit low-income families: the earned income tax credit, the child credit, and the childcare credit account.
(…) But for the vast bulk of nonpayers, the explanation is simple: the federal tax code is designed not to tax either poor families or working class families with children, and there are more of these in America than you’d think. One way or another, it turns out, this accounts for about 40% of the country.