Breaking Down the Lucky Duckies

| Thu Jul. 28, 2011 12:57 AM EDT

The other day I wrote about the zombie lie that half of Americans pay no taxes. This is something conservatives repeat routinely, somehow forgetting repeatedly to explain that what they really mean is that half of Americans pay no federal income tax but do pay plenty of other taxes. When you call them out on this wee mistake they tend to get offended — though somehow, never quite offended enough to stop saying it.

But put that aside. 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.

And the other 6%? Their taxes are zero for a variety of reasons: above-the-line deductions and tax-exempt interest; itemized deductions; education credits; other credits; and reduced rates on capital gains and dividends. TPC's report has all the gruesome details.

But for the vast bulk of nonpayers, the explanation is simple: the federal tax code is designed not to tax the poor, the elderly, or low-income 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.

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