Congress, Politics

Half Of Americans Don’t Pay Any Taxes

-Submitted by David Drumm (Nal), Guest Blogger

It’s a common claim from the Right, but it’s not true. Senator John Cornyn (R-Texas), in a Senate floor speech,  claimed “Fifty-one percent — that is, a majority of American households — paid no income tax in 2009. Zero. Zip. Nada.” At least he used the often omitted “income” adjective. However, those individuals still pay payroll taxes, like Social Security and Medicare, sales taxes, and often property taxes.

When Republican Senators give speeches complaining about someone not paying enough tax, you can be sure of two things: one, they’re not talking about corporations and two, they’re not talking about the wealthy. If you’re not a member of either of those two groups, hold onto your wallet. The Republican hatred of increasing taxes doesn’t apply to everyone’s taxes, just those who can afford to them get re-elected.

A report from the Tax Policy Center examines the facts. Here’s an overview:

  • 23% pay nothing because they’re poor. For example, a couple with two children earning less than $26,400 will pay no federal income tax this year because their $11,600 standard deduction and four exemptions of $3,700 each reduce their taxable income to zero.
  • 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.

The other 6% benefit from tax-exempt interest, itemized deductions, education credits, other credits; and reduced rates on capital gains and dividends.

That’s whom the Republicans want to tax: poor families and the elderly, those least able to afford the tax increases. The shocking aspect of these facts is the existence of such a huge number of people that are so poor, they balloon the percentage up to 46%.

H/T: Kevin Drum, Roberton Williams, Donald Marron.

80 thoughts on “Half Of Americans Don’t Pay Any Taxes”

  1. I’m very grateful for handles and gravatars….I learned early on that after a column or two who never to waste my time reading.. Tootie, kderosa, ect ….I do read the follow ups by other members usually with great amusement but I’m not about to waste my time reading the inane dribble those types like to spew .

  5. When you are that poor, you don’t rent. You make yourself a little squatter shanty out of scrap metal and you grow food by subsistence farming. Our poor don’t have to resort to that, they rent/own houses with modern amenities and are, on average, supernutriated. So, yes, their income level is important as is the their level of non-cash and cash benefits which are substantial.

  6. “…do you know what the income level is for the 46th percentile. remember what is considered “poor” in much of the rest of the world is #1 or $2 a day.”

    That’s a completely irrelevant comparison?

    I wonder what it cost to rent a dwelling in those places where people are living on $2/day

    Not to mention people pay sales taxes, and a whole host of fees (which are taxes in another guise).

  7. @Frank, do you know what the income level is for the 46th percentile. remember what is considered “poor” in much of the rest of the world is #1 or $2 a day.

    @rcampbell, sounds like your income is derived from mutual funds that are not held in a tax deferred vehicle like an IRA/401k/403b. you should probably follow the incentives of the tax code more closely if you wish to avoid taxable gains/losses. This is how your governmental overlords control your behavior and it is wise to obey them.

  8. kderosa

    I wasn’t describing something theoretical or academic. I’m stating the fact that I have paid zero federal income tax for 2008, zero for 2009 and $3K for 2010. My income is derived entirely from investments. As various funds unloaded shares in panic selling after 9/15/08, those transactions created significant losses which were passed through to all of those funds’ investors. Though the paper value had fallen, there was still sufficient value in the portfolio to fund my daily life and those losses were used to off set the gains accrued from the market’s recovery during the ensuing years without tax consequence. My circumstances and experience are not unique. I’ve discussed it with several folks I know and found the experience to be pretty common.

  9. Lets talk about GE. Jeffery Immelt was the presidents choice to lead the Council On Jobs And Competitiveness.

    Obama said that his job is “putting our economy into overdrive” and to announce a restructured presidential advisory board stressing increased employment and greater business opportunities abroad.

    I guess this is what he meant by business opportunities abroad.

    GE Moves Healthcare Division’s X-Ray Unit Headquarters To China

    GE Moves Green Jobs To China

    General Electric moves production from its lamp plant in Virginia to China

    GE Energy Opens Wind Turbine Assembly Facility in China

    You can google GE Moves bussiness and remember GE paid no taxes.

    Great pick Mr. President you are putting our economy into overdrive. Too bad it’s in the wrong direction.

  10. Yeah – those lucky bastards that make so little money they don’t pay Federal income tax – lets screw them like they can afford it!

    Thanks for highlighting the lie “half of Americans don’t pay taxes” parroted by FAUX news and the toadies like Klownderosa.

    The other half of the equation is that for 30 years now the Federal government has been taking FICA income & spending it to hide the real cost of the Reagan tax cuts. They now want to pretend those trillions of dollars, sitting in IOUs in a vault in MD are worthless. “Cutting” SS now really means never paying back on the promise made when FICA was raise to prepare for the boomer retirement. Screw the working poor again.

  11. However, those individuals still pay payroll taxes, like Social Security and Medicare, sales taxes, and often property taxes.

    Payroll taxes often lead to a refund. Give it to them now so they can give it back to you later.

    SS, it’s your account.

    Medicare, you want health coverage don’t you ?

    Sale Tax is only for the people who have money to buy something

    Property Tax if you haven’t noticed not many own property anymore.

  12. Actually, @Elaine, everyone is getting richer in the U.S., the “rich” are just getting richer a bit faster.

  14. @rcampbell, the crashing of the stock market does not create tax consequences. Only the sale of stock, outside of a tax deferred/exempt investment vehicle, creates recognized gains or losses. Further, a capital loss is not a tax shelter, it merely offsets capital gains with some carryover effects. And, taxes on capital gains represent a double taxation since the capital was derived from taxable income at some point.

  15. Nal,

    “The shocking aspect of these facts is the existence of such a huge number of people that are so poor, they balloon the percentage up to 46%.”

    You got that right. We’re losing our middle class while the rich keep getting richer.

  16. The fact that Cronyn picked 2009 as the year for his example is quite telling. I would submit that a pretty large percentage of those who did not pay taxes in 2009 were people aa lot of money invested in the stock market during 2008. After GWBush could no longer hide the failure of his conservative policies and of his presidency and he was forced to introduce us all to TARP on Sept. 15, the market crashed by 30%. This created huge capital losses for high net worth individuals. These loses were still being used to shelter earnings from the market’s impressive recovery during ’09 and ’10. Many quite wealthy people saw the return of the value of their portfolios without paying any taxes on the gain for three consecutive years.

    So, when Cronyn talks about folks not paying taxes specifically in 2009, he’s also talking about some of the folks who got the benefit of lower tax rates at the top end who had extra income to invest and then benefitted again from the tax code allowing their losses to shelter their gains. But then, he tell us the whole story, did he? Some folks call that lying.

  17. As the report makes clear on p. 2, 46% of all tax units pay no federal income tax. That is the common claim, and this report verifies it. Thanks, Nal!!!

  18. Thanks, Nal. This is good information. I had suspected as much, but never took the time to track down the data. Thanks.

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