[Promoted by Epluribusunum. I was remiss in not finding and promoting this when it was first published. When asked to recommend someone who could speak with authority about poverty in Loudoun, I immediately thought of Ann. She will be leading a discussion about poverty in the US and in Loudoun tomorrow at St. James UCC in Lovettsville.]
Much has been made in the news recently about (supposedly) 50% of Americans who “don’t pay income taxes,” and whether or not they contribute to our national welfare. An analysis that takes into account all taxes paid—shows that everyone has “tax skin in the game.” About two-thirds pay payroll taxes, and most pay state and local sales taxes as well as excise taxes on gas.
According to the nonpartisan Tax Policy Center, of those that file 1040s showing a zero tax due on April 15:
13 percent are a mix of mostly higher-income individuals with enough itemized deductions for items like mortgage interest, health payments, or charitable contributions, education tax credits, or tax exempt interest to zero out their income taxes.
22 percent are senior citizens who can exclude some or all of their Social Security income (which was taxed previously at the outset) and may have tax-exempt interest from mutual funds and municipal bonds. For those who itemize, charitable contributions and medical expense deductions also subtract from their tax liability.
15 percent are working families, many of them extremely low-income, who qualify for one or all of the Earned Income tax credit, the Child tax credit, the Child and Dependent Care tax credit.
For half of those that don’t pay federal income taxes, standard deductions and personal exemptions are enough to counteract their taxable earnings. A couple with two children earning less than $26,400, for example, will pay no federal income tax in 2011 because their $11,600 standard deduction and four exemptions of $3,700 cuts their taxable income to nil.