True Or False? Over 50% Do Not Pay Income Taxes

True. Earlier this week I had a little tussle with Pastor Rick Warren because he made a statement (later acknowledged to be mean-sounding) about how the 50% who paid no taxes were perfectly ok with having the 50% who did pay more. I

up

[h/t Heather]

True. Earlier this week I had a little tussle with Pastor Rick Warren because he made a statement (later acknowledged to be mean-sounding) about how the 50% who paid no taxes were perfectly ok with having the 50% who did pay more.

I jumped on his claim because it's one Fox News likes to make all the time too, and it's without justification. However, a new study does prove that less than 50% of taxpayers pay federal income tax, and shows why. I'll bet the answer won't surprise anyone here.

Donald Marron:

Low incomes (or, if you prefer, the standard deduction and personal exemptions) account for fully half of the people who pay no federal income tax.

The second reason is that for many senior citizens, Social Security benefits are exempt from federal income taxes. That accounts for about 22% of the people who pay no federal income tax.

Tax Policy Center (PDF):

About 46 percent of American households will pay no federal individual income tax in 2011, roughly half of them because of structural features of the income tax that provide basic exemptions for subsistence level income and for dependents. The other half are nontaxable because tax expenditures— special provisions of the tax code that benefit selected taxpayers or activities—wipe out tax liabilities and, in the case of refundable credits, result in net payments from the government. Most important of those tax expenditures are provisions that benefit senior citizens and low-income working families with children. While those factors particularly affect lower-income households, different provisions eliminate taxes for other households. Itemized deductions and credits for children and education are more important for middle-income households, while the relatively few high-income nontaxable households benefit most from above-the-line and itemized deductions and reduced tax rates on capital gains and dividends.

The next time you hear someone sneer about all the deadbeats in this country who don't pay income taxes, you might want to suggest that if they earned more, they'd pay more.

Oh, and with regard to Rick Warren....We're going to be having a more extensive discussion about the whole thing in a couple of weeks. Stay tuned.

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