Who Really Doesn’t Pay Taxes?

The Backstory on Who “Doesn’t Pay” Taxes

NEW YORK – Pundits and politicians are throwing around a lot of numbers these days. When it comes to taxes and who is or isn’t paying them, one group aims to separate the facts from fiction.

Chuck Marr, director of federal tax policy for the Center on Budget and Policy Priorities, co-authored a report on the tax issue. He says one of the biggest misconceptions is that about half of Americans, 47 percent, do not pay taxes.

“We’re talking here about federal income taxes. Working-class and middle-class people do pay federal payroll taxes for Social Security and Medicare. In fact, most people pay more in payroll taxes than in income taxes.”

Marr says other taxes – such as state, local and sales tax – are also a big part of the equation. According to the Center report, when considering all forms of taxes, the bottom 20 percent of households pay an average of 16 to 17 percent of their income in taxes. The people who do not pay federal income tax or payroll tax generally are low-income seniors, people with serious disabilities, or students – most of whom become future taxpayers. In the case of seniors, they likely paid federal income taxes during their working years.

The 47 percent and 57 percent figures that have been cited lately regarding people who do not pay federal income taxes were taken from reports that looked at taxpayer numbers during the recent recession, Marr adds, when people lost their jobs and therefore were paying much less tax than in previous years.

“When a person’s income falls during a recession, they pay less tax – it’s the same with a business – and that helps them to get back on their feet. You wouldn’t expect someone to pay the same amount of tax if they’re making half the money they used to make.”

Prior to the recession, in 2007, the percentage of people not paying federal income tax was 40 percent, according to the report.

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