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发帖数: 36302 | 1 Surprise! Who's not paying federal income tax?
By Todd Spangler, Detroit Free Press
WASHINGTON – Amid complaints that nearly half of tax filers in the U.S. won
't pay federal income taxes this year, this has been lost: Those making $75,
000-$100,000 a year are the fastest-growing share of people who don't pay
federal income taxes.
Not working poor people — but those who are firmly middle class.
They still make up less than 1% of the total number of income tax filers who
pay no tax at all, but their overall number has exploded, from fewer than 5
,000 not paying taxes in 1996 to nearly 500,000 in 2009, the most recent
year of available data.
The lowest-income Americans — those who make less than $25,000 a year —
account for the largest number of those not paying any federal income tax:
76% as of 2009. But that share has been decreasing for years. Meanwhile, the
percentage of nontaxable returns has been growing for people with higher
incomes. As of 2009, more than 20,000 filers making more than $200,000 a
year — 1,470 of whom had adjusted gross income of more than $1 million —
owed no income tax, a Detroit Free Press analysis showed.
On Wednesday, Senate Democrats were talking up an added 5% tax on
millionaires, a proposal Republicans almost certainly will block. But as the
debate on tax revenue continues, the question of who pays — and who does
not — is certain to keep coming up.
Tax breaks, credits ease tax burden
In recent years, the tax code has exploded with more ways for Americans to
be forgiven part of their income tax burden, so much so that more Americans
seem to avoid paying taxes at all.
Well, there are still those pesky Social Security and Medicare payroll taxes
, as well as various state and local sales taxes that are harder to avoid.
But more middle- and even upper-income taxpayers are avoiding federal income
taxes.
In recent months, estimates that as many as half of all U.S. tax filers
might owe no federal income tax at all this year have caused critics to
argue the issue of fairness — especially as President Obama and Democratic
members of Congress push for higher taxes on wealthier earners.
Here's a look at who doesn't pay, and why.
Question: So the reports that half the U.S. doesn't pay taxes are true?
Answer: No, they're not. According to the nonpartisan Tax Policy Center in
Washington, D.C., 46% of tax filers will owe no federal income tax this year
. But when you figure in payroll taxes — such as those for Social Security,
Medicare and unemployment — more than 80% of tax filers pay some kind of
federal tax. And that doesn't include sales taxes, state taxes, local taxes,
gas taxes, etc., which catch just about everyone.
Q: But almost half the filers don't pay federal income tax. How come?
A: It's because of the way the tax code is written. In 2010, a married
couple filing jointly didn't have to pay any income taxes if their income
was less than $18,700; couples older than 65, if their income was $20,900 or
less. And even if you make more than that, the standard deduction — which
goes up each year — and a myriad of other deductions and tax breaks reduce
income tax exposure. In 2009, the most recent year for which Internal
Revenue Service data is available, filers with adjusted gross income of less
than $30,000 made up 83% of all the nontaxable returns. According to the
Tax Policy Center's calculator, a couple with two kids younger than 13 that
makes $30,000 would get $5,000 back under current laws.
Q: Isn't it poor people who aren't paying?
A: No, at least not them alone. A Free Press analysis of IRS data shows that
, in 1996, people with incomes of less than $30,000 made up 99.5% of all the
nontaxable returns. In 2009, that group made up 76% of those returns. On
the other hand, people making more than $30,000 went from less than 1% of
nontaxable returns in 1996 to 17% in 2009.
Q: But $30,000's not a big income — is most of that growth among nonpayers
coming near the bottom of that scale?
A: Much of it is — the number of nontaxable returns for filers with incomes
of $30,000-$40,000 went from about 85,000 — about a third of 1% of the
total — to 4.8 million, or 8% of the total, by 2009. That's an increase of
more than 5,000%. (By way of comparison, the overall number of tax returns
went up by about 17%, and the total number of nontaxable returns doubled in
that time.)
But the percentage increase was even bigger for higher wage earners.
Nontaxable returns from people with income between $75,000 and $100,000 went
from 4,025 in 1996 to 476,624 in 2009 — an increase of almost 12,000%.
More than 1,400 millionaires didn't pay income taxes in 2009, either.
Q: Why the change?
A: Tax cuts and tax breaks. As Clint Stretch, tax policy expert at Deloitte,
explains it, the tax cuts won by President George W. Bush in 2001 and 2003
not only reduced income tax rates, they doubled the child tax credit from $
500 to $1,000; eliminated the marriage penalty by giving couples twice the
standard single deduction (rather than a slightly smaller amount), increased
the earned income tax credit, cut capital gains taxes and more. All of
those items — as well as breaks like those for mortgage interest,
charitable deductions and medical expenses — can mean a huge savings.
But it didn't stop there. President Barack Obama added other breaks, too,
like the Making Work Pay credit — worth $800 to a couple or $400 to an
individual filer — as well as the American Opportunity Credit for college,
worth up to $2,500 per student, on top of the $4,000 tuition and fees
deduction. "Mathematically, you're not going to pay taxes" if you have a
modest income and qualify for a lot of those breaks, Stretch said.
Q: If we get rid of those breaks, will more people pay?
A: Yes, but that would have a lot of other effects, as well — some of which
are difficult to predict. Let the child tax credit decrease and Obama's
Making Work Pay credit expire, and it takes money out of people's pockets.
Reduced spending by families could further slow the economy. Reduce the
mortgage-interest deduction, and people may choose to use more of their
savings — potentially reducing spending on other items — or restrict
themselves to less-expensive homes, holding down the housing market. And if
people have to spend more on college, without the breaks offered there, or
if senior citizens pay more in taxes, that money can't be used in the
consumer market.
Q: Did the recession play a role in the increase?
A: It did and it does. As of 2009, the total number of tax returns had
increased slightly over 2006. But the number of taxable returns actually
fell — by close to 12%, or more than 10 million returns — during that
period. Total adjusted gross income (AGI) fell by 5%, a drop of about $400
billion to $7.6 trillion. By comparison, from 1996 to 2006, the total number
of returns rose by 18 million — about 15% — and the total number of
taxable returns rose by 1.8 million — 2%. That's modest growth, but during
that period, total AGI nearly doubled, from $4.5 trillion to more than $8
trillion. In short: more people making less with more deductions and bigger
exemptions means more nontaxed returns.
Q: But the trend was already in that direction?
A: Yes. In 1996, 76% of all returns were taxed. In 2006, 67% were taxable.
But the recession deepened the trend. In 2009, 58% were taxable, 42% were
not — and the Tax Policy Center estimates 46% will be nontaxable this year.
Q: Is it likely to continue?
A: That's unclear. Obama wants to extend some of his and Bush's tax cuts for
middle- and lower-income earners, but there's very little political chance
of Republicans in control of the House allowing higher taxes for higher
earners — even those making $1 million or more annually — to be enacted.
But a stalemate could lead to the Bush-era tax cuts — including the child
tax credit, capital gains cut and more — expiring at the end of next year,
which would lower the number and the amount of the breaks.
There is talk of reforming and simplifying the whole system. In the meantime
, Len Burman, a tax policy expert who has worked for the Treasury Department
and the Congressional Budget Office, said that although almost everybody
pays some kind of tax, "over the last 30-40 years, there's been a shift
toward providing more and more public services through the tax system."
From a political standpoint, that has been easier than raising taxes to fund
new programs. And changing that will be difficult, politically.
As Burman asked rhetorically when GOP presidential candidate and Texas Gov.
Rick Perry said he was "dismayed" by the number of Americans not paying
income taxes, "So you're going to raise taxes on middle-income people?" |
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