46 Percent of Americans Exempt From Federal Income Tax in 2011

Nearly half of American tax filers will pay no federal income taxes this year, according to data released by the Tax Policy Center.

Some 76 million tax filers, or 46.4 percent of the total, will be exempt from federal income tax in 2011.

But with the help of the government, a similar percentage of filers -- many of them among the bottom 40 percent of earners -- have legally avoided paying federal income tax for the past several years.

More than half the filers exempt from federal income tax in 2011 are in the lowest income quintile, meaning they make less than 80 percent of the country. As Bruce Bartlett at The New York Times notes, those in the bottom quintile have incomes of less than $16,812.

There are 40.7 million nonpayers in this group -- about 93.3 percent of the quintile, and 53.6 percent of all nonpayers overall.

Nonpayers are well represented in the second-lowest quintile, as well: That group includes 22.2 million filers who won’t pay federal income taxes this year. This is 60.3 percent of the quintile and 29.2 percent of the total number of nonpayers.

The phenomenon of low-earning Americans escaping the federal income tax burden isn't a new one. In 2002, The Wall Street Journal coined the term "lucky duckies" to describe people who were exempt from income tax because they didn't make enough money.

That phrase, unfortunately for the WSJ, attracted no end of ridicule, from the NYT, The New Republic, and elsewhere.

"Had the editors ever met a person of little means?" wondered Farhad Majoo at Salon. "Did they realize that being poor, while perhaps an attractive tax shelter, tended to come with such hard-to-bear downsides as not knowing where your next meal will come from?"

In most cases, tax filers who don’t pay federal income tax are still on the hook for other taxes. They can still be responsible for payroll taxes, withheld from their paychecks, and for excise taxes on gasoline, tobacco, alcohol, and other goods. And they may have to pay income tax at the state or local level.

Many filers exempt from federal income tax are the beneficiaries of programs aimed at helping the working poor. At the NYT, Bruce Bartlett points out that between 2000 and 2008, during the presidency of George W. Bush, the percentage of filers who paid no federal income tax rose from 25.2 percent to 36.3 percent. During this time, Bartlett says, Republicans added a significant child credit to the tax code, resulting in a rise in nonpayers.

In fact, the number of filers paying no federal income tax has hovered between 40 and 50 percent for the past several years.

In 2010, 45 percent of households paid no federal income tax, according to the Tax Policy Center. In 2009, it was about 47 percent. In 2008, 49 percent were exempt from federal income tax.

All in all, according to the Tax Policy Center, there will be 76 million nonpaying “tax units” in 2011. The Center defines a tax unit as “an individual, or a married couple who file a tax return jointly, along with all dependents of that individual or married couple.”

And not all of those tax units represent the working class.

Nine million nonpayers, or 12.8 percent of the total, are in the middle income quintile. Another 1.9 million -- 2.6 percent of the total -- are in the second-highest quintile, and some 443,000, or 0.6 percent of the total, are in the top quintile.

The Tax Policy Center breaks down that last number a bit further: There are 78,000 non-paying units in the top 95th to 99th income percentile, 24,000 in the top 1 percentile, and 3,000 in the top tenth of a percentile.

This group has a nickname, too: they're the HINTs, for high income, no taxes.

These might be people who get their income from tax-exempt bonds or overseas sources, as CNN reported last year.

Or they might be people who have incurred losses from partnerships or S Corporations. Or people who have run up "extraordinary" medical or dental bills. As The Fiscal Times noted in December, these are other ways to realize one's HINT status.

And as The Fiscal Times points out, they're all "perfectly legal."

Comments

[Cowboylove]

02:43 AM on 07/30/2011

Low earning Americans are still subject to the 15.56% social security tax which is a federal income tax - which is more than billionaire hedge fund managers pay - and those hedge fund managers are 100% exempt form social security taxes. In addition, those people pay state and local taxes as well as federal excise, utility and gas taxes as well as Federal licenses taxes and fees. The only people who skate by on paying less taxes are the millionaires and billionaires who pay total taxes of less than 18% on their income which is largely exempted form most federal taxes.

[cyclone70]

08:22 AM on 07/19/2011

That may be that 46% pay no federal tax, but people still pay the more regressive taxes like license fees, property taxes, sales taxes, state and local taxes, user fees, utility taxes and so on, all taking bigger bites out of modest income paychecks, at the same time peoples food, energy, medical, education costs are on the rise as well

the whole idea of the federal progressive tax structure was to equalize this effect

[CarolinaN]

11:29 AM on 07/10/2011

The numbers don't say what you think they do. They're talking about "tax filers", not households.

Let's say my husband and I have an AGI of $110,000 per year and file a joint return. We're one unit. We pay federal income tax.

My husband's mother, age 78, who lives with us, gets Social Security. She is required to file a return although she's over 65 and blind, because her unearned income (from Social Security) was more than $3,750. However, she ends up with a $0 federal tax bill.

Our son is a full-time student, and his part-time job paid him about $6,500 last year. He has to file (more than $5,700 in earned income) but has a $0 federal tax bill, too, although he does pay into Social Security and Medicare.

Therefore, since my husband and I count as one filing unit and Gran and Junior count as one each, our household consists of 2/3 (67%) non-taxpayers.

I don't know how many filers are elderly on Social Security or student dependents with small incomes, but the last figure I saw said that 60% of filers who paid no taxes had incomes under $20,000, so I'd imagine quite a few.

[bejayech]

09:58 AM on 07/01/2011

Truth is, folks adept at avoiding taxes find ways to report far less income than they actually make.

[blueken]

09:45 AM on 07/01/2011

I'm a left wing, commie rat. Let's get that on the table, but this is wrong. Everybody should have skin in the game, even if it's only a little. I hate the tax breaks that profitable corporations get. I hate the low tax rate on capital gains, but at the end of the day, I think we should all participate in the financeing of our government.

[Patriot86]

07:59 AM on 07/01/2011

I looked at the data...top incomes are excluded...many wealthy folks don't pay taxes and don't receive a refund...more fake statistics...and this does not consider payroll taxes.

[VoteThemAllOut]

10:41 PM on 06/30/2011

"Some 76 million tax filers, or 46.4 percent of the total, will be exempt from federal income tax in 2011.

But with the help of the government, a similar percentage of filers -- many of them among the bottom 40 percent of earners -- have legally avoided paying federal income tax for the past several years."

Are these the same people who are always complaining that the 'rich' do not pay enough taxes. Do you ever ask yourself why 50% pay all of the taxes and why the 50% who pay none get all of the services continually cry poor me?

Dumb question, really need to ask how I can pay no taxes and get all the benefits.

[McGyver1]

09:00 AM on 07/01/2011

What it tells me is that almost half of America is not making enough, after exemptions, to meet the minimum requirement to pay. Which is:
Single, under 65: $9,350
Married, filing jointly, both spouses under 65: $18,700
It also tells me that rich control more of the nations wealth. Which also tells me what a sad state the economy is. And so what is the point?
Wealthy people are complaining because 46% of the country is broke and don't qualify to pay taxes??

[denny8844]

09:40 AM on 07/01/2011

not necessarily tied to just gross income. It can also be generous deductions and actual tax credits. I can easily set up a scenario where a family of 4 earning $60,000 pay no federal income taxes due to exemptions, deductions and tax credits. With a little work I can come up with situations where a family can earn $70,000 and pay no income taxes.

[bejayech]

10:00 AM on 07/01/2011

"Wealthy people are complainin­g because 46% of the country is broke and don't qualify to pay taxes?? "

No, the 55% that do pay want some parity. I pay lots of money in federal taxes. I have a friend who maintains the same lifestyle as I do, but as a self-employed person he's worked out a bunch of LEGAL (though unethical, IMO) schemes to make it appear as though he makes almost nothing. He pays nothing in federal income tax. He's not alone.

[jack Winn]

04:48 AM on 07/06/2011

Yes, we notice how the lowest quartile have caused the major problems our country faces today, the financial meltdown and the problematic wars. Flakes at the bottom of the food chain don't seem to be the problem that flakes at the top are.

I think I heard something somewhere that seems to apply here - "you break it, you buy it".

[Dosadi]

10:34 PM on 06/30/2011

All the property that is necessary to a Man, for the Conservation of the Individual and the Propagation of the Species, is his natural Right, which none can justly deprive him of: But all Property superfluous to such purposes is the Property of the Publick, who, by their Laws, have created it, and who may therefore by other laws dispose of it, whenever the Welfare of the Publick shall demand such Disposition. He that does not like civil Society on these Terms, let him retire and live among Savages. He can have no right to the benefits of Society, who will not pay his Club towards the Support of it. Benjamin Franklin, letter to Robert Morris, December 25, 1783

[offmyrocker]

09:45 PM on 06/30/2011

WOW tax 1% or 50% ah lets see ...not from not equals liberal thinking must be 1% thats it tax the 1%

[Joe Friday]

09:08 PM on 06/30/2011

Finally a Huff&Puffaol reality check.

The "Rich" need to pay more so more "unfortuniates" can be added to the "poor rolls". The burden of Liberalism and it's obligations seem to fall on the "Rich"! So maybe raising taxes on the "Rich", they will become less interested in supporting Liberalism. That's a good thing!

[jack Winn]

04:51 AM on 07/06/2011

If low taxes correlated to low skills, people wouldn't be complaining. The problem we are having is the sense that the people who ran the country into the ground should pay to pick up their mess.

[Joe Friday]

10:17 PM on 07/06/2011

LostJack .... jack, your logic is lost! Go look for it again!

[purplet trader]

08:12 PM on 06/30/2011

sad that so many people make so little-

[Katina Cooper]

06:53 PM on 06/30/2011

Unfortunately, I have to count myself in the %53.6 of those who DO have to pay tax. Maybe I should declare myself as a corporation and put my money in a Dubai bank. Then, I not only wouldn't have to pay any tax, but I would get a tax refund from the government.

[dwangelo]

04:58 PM on 06/30/2011

HALF???

I don't think we need to raise taxes on the top to make them pay their "fair share" at this point. I think we need to cut spending.

[Trepasky]

07:32 PM on 06/30/2011

Nice but the facts are of the 47% who paid no taxes in 2010 about 10% made more than $50,000 and many made millions.

The very wealthy paid an average of 17% while most middle class paid more (18%)

Do you think the wealthy are paying a fair share?
Maybe you would like the middle class to pay more to make up the difference?

[offmyrocker]

09:46 PM on 06/30/2011

you know what, you live here breath the air, drink the water pay your damn taxes

[dwangelo]

09:52 PM on 06/30/2011

Never understood how a flat tax came to be considered the spawn of s a t an.

Oh, I know...because it would require a smaller government.

[flinthfp]

04:41 PM on 06/30/2011

The T_GOP want to reduce the minimum wage, get rid of unions and then complain the poor don't pay enough taxes while they give tax breaks to the rich....and these guys called themselves the so called "Christian Moral Majority"

[conservativewhitemale]

07:35 PM on 06/30/2011

Whats our "fair share" to pay, to keep the other half in a middle class lifestyle?

[purplet trader]

08:15 PM on 06/30/2011

that doesn't make any sense- You paying more taxes pays for the wars- unpaid for- the temp tax cuts- that Bush passed- The top% has made more money than they ever dreamed of in the last 10 yrs- so yes they can afford to pay for roads- bridges- wars- ect

[flinthfp]

04:20 PM on 06/30/2011

I doubt if there is ONE person on Wall Street that would change places with so called "Lucky Duckies" earning less than $16,812 yr.

[Trepasky]

07:33 PM on 06/30/2011

How about the almost 10% of the 47% who paid no taxes in 2010. That group made more than $50,000 and many made millions.

[Dosadi]

10:28 PM on 06/30/2011

The GOP will protect them with your life.