And those aren’t the only other taxes they bear. According to economic research, the corporate income tax discourages domestic investment; that depresses wages, so workers are effectively paying some of the corporate tax. More directly, many households pay federal taxes on gasoline, beer and cigarettes. And then there are state and local sales, property and income taxes — all of which are often less progressive than the federal income tax. Putting all these together, a family of three with an income of $30,000 would owe no federal income tax (in fact, they would get money back). But they could easily pay more than $4,500, or 15 percent of their income, in taxes.
2. Members of the 47 percent will never pay federal income taxes.
Politicians and commentators often talk about those who don’t pay income taxes as though they’re in a special club with lifetime membership. In fact, it’s a highly diverse group, some of whom move in and out from year to year.
When they first join the workforce, for example, young people may not earn enough to pay federal income taxes. The same is true for many of the temporarily unemployed, working parents and entrepreneurs whose businesses experience a loss. But most of these people look forward to the day, perhaps in just a year or two, when their incomes will rise and they will join or rejoin the 53 percent of Americans who do pay federal income taxes.
The reverse is true for many senior citizens: They may pay no federal income tax in retirement, but most did during their working years.
3. Many high-income people game the system to pay no income tax.
Our jerry-rigged tax code leaves many Americans with a nagging sense that other people are exploiting loopholes to avoid taxes — and the rest of us have to make up the difference. Sadly, there’s an element of truth to that. But gimmickry by high-income taxpayers has essentially nothing to do with who does and doesn’t pay income taxes. Our colleagues at the Tax Policy Center estimate, for example, that households with cash incomes of $200,000 or more account for less than 0.1 percent of the 47 percent.
The vast majority of people who pay no federal income tax have low earnings, are elderly or have children at home. They are exempt from the income tax because of features Congress added to the tax code, thanks to bipartisan efforts, to help these groups. For example, Presidents Ronald Reagan and Bill Clinton both favored the earned-income tax credit (EITC), which has helped millions of families stave off poverty.
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