Record Number of Tax Filers Paid No Federal Income Taxes in 2008

[bik0]

MARCH 10, 2010

Record Number of Tax Filers Paid No Federal Income Taxes in 2008

About 51.6 Million Filers Were "Nonpayers," Including Some Families Making Over $50,000

Washington, DC, March 10, 2010 -- A record number of the 142 million tax returns filed in 2008 resulted in no tax payment, according to a Tax Foundation analysis of IRS data. That means the tax filers got back every dollar that had been withheld from their paychecks, and often more. Roughly 51.6 million tax returns, or 36.3 percent, were filed by such "nonpayers," people whose exemptions, deductions and credits wiped out any federal income tax due.

A family of four earning more than $50,000 can have no income tax liability after taking the standard deduction and the child tax credit.

"Two records were set in 2008: the most nonpayers and the highest-earning nonpayers," said Tax Foundation President Scott Hodge, who authored Tax Foundation Fiscal Fact, No. 214, "Record Numbers of People Paying No Income Tax; Over 50 Million 'Nonpayers' Include Families Making over $50,000." The Fiscal Fact is available online at http://www.taxfoundation.org/publications/show/25962.html.

"Nonpaying status used to be a sure sign of poverty, but thanks to increased use of the tax code to deliver social benefits, incentivize behaviors and funnel money to targeted groups, middle-class families have now been pulled into the growing pool of nonpayers," Hodge said. "We're now in a situation where a record number of tax filers are completely disconnected from the cost of government."

The number of nonpayers has increased by 59 percent in less than a decade, growing from 32.6 million in 2000 to 51.6 million in 2008. In the same time period, the total number of tax filers grew by only 10 percent.

The last record for the number of nonpayers was set in 2006, when 33 percent of tax filers paid nothing. A record has been set every year since 2002 (30.1 percent), as tax cuts throughout the Bush years - especially the refundable child tax credit - pushed low- to middle-income people off the federal income tax rolls. The major tax change in 2008 was the Economic Stimulus Act of 2008, included tax rebates that boosted the number of nonpayers.

The number of nonpayers has increased by 59 percent in less than a decade, growing from 32.6 million in 2000 to 51.6 million in 2008. In the same time period, the total number of tax filers grew by only 10 percent.

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

http://www.taxfoundation.org/publications/show/25962.html

[gmoney]

1. Yeah, the right loves these stats

"Look at all these people who pay NO Federal taxes, yet they control the elections because they're allowed to vote! Fair tax... tea party... poll tax... rabble rabble..."

[bik0]

2. I have no problem paying my share...

I believe it's responsible and patriotic.

[Newsjock]

3. More handouts for the children while the single folks have to pay extra

Only half :sarcasm:, I fear.

[LiberalFighter]

6. We pay extra in other ways.

Not receiving discounts because it is difficult to take advantage of 2 for 1 or other types of discounts at restaurants.
Food waste because it takes longer to use the groceries or it is not expedient to take advantage of bulk purchases.

Then there is the cost ratio of paying for utilities, insurance, furnishings between a single person vs a family.

And then there is the time factor. Where a family can pitch in with chores a single person either does it all their self or hire someone to do it.

[LiberalFighter]

4. The stats are intentionally misleading

First, the population increases and the number of working persons increases or would be working if they could find a job. So naturally, the number of so called nonpayers would increase.

Second, these are difficult times with too many people without jobs that normally would have jobs and pay taxes.

Third, a family that has 4 people in the household with say $50,000 and one with $250,000 income and having the same deductions and exemptions would both have the the same base income that is not taxed. There are a few exceptions but both sides get additional exemptions or deductions that the other normally doesn't receive.

So overall, to suggest that only low income earners don't pay taxes is not a proper claim.

[bik0]

7. look at the percentages - not the numbers

36.3% in 2008 were non-payers, between 1950 and 1990 the avg was 21%.

It's true things were worse in 2008... there were 2.4M jobs lost in 2008. The year started with an unemployment rate of 4.6% and ended at 7.2%

Your example of a spouse making $250,000 not paying taxes... I don't see how you come up with that.

Who suggested only low income earners don't pay taxes?

>The number of nonpayers has increased by 59 percent in less than a decade, growing from 32.6 million in 2000 to 51.6 million in 2008. In the same time period, the total number of tax filers grew by only 10 percent.

Between 1950 and 1990, the percentage of tax filers whose entire tax liability was wiped out by these provisions averaged 21 percent.

Since the early 1990s, however, lawmakers have increasingly used the tax code instead of government spending programs to funnel money to groups of people they want to reward. Credits have been enacted to subsidize families with children, college students, and purchasers of hybrid cars, just to name a few of the most well known. In terms of tax revenue, the most significant of these socially targeted credits was the $500 per-child tax credit enacted in 1997. The 2001 and 2003 tax bills doubled the value of the credit to $1,000 and added a refundable component.

A record number of the 142 million tax returns filed in 2008 resulted in no tax payment, according to a Tax Foundation analysis of IRS data. That means the tax filers got back every dollar that had been withheld from their paychecks, and often more. Roughly 51.6 million tax returns, or 36.3 percent, were filed by such "nonpayers," people whose exemptions, deductions and credits wiped out any federal income tax due.

[LiberalFighter]

8. I wasn't suggesting that.

I was indicating that there is a base income that both levels of income with the same size family, exemptions, and deductions available to both parties would not pay taxes.

[bik0]

10. There is no "base income" which is non-taxable...

If you look at the tax table, taxes are owed on every dollar earned from dollar one...

http://www.unclefed.com/IRS-Forms/taxtables/2008_i1040tt.pdf

what reduces taxes are the credits and deductions. What the study points out is the number of credits and deductions have grown to the point where you have to earn over $50,000 before your tax owed in the tax table is more than the credits and deductions.

[LiberalFighter]

11. If you look at the tax tables when you file your return it is taxable income.

For each qualified individual in the household there is a $3,650 exemption for each person.

That means in a four person household $14,600 of income is exempt from taxes. Doesn't matter if that household has $30,000 or $250,000 of gross income. They both have $14,600 of income that is not taxed. Net taxable income at this point would be $15,400 and $235,400 respectively. I'm sure that the person with $250,000 of gross income will have more deductions to claim than the one with $30,000 which reduces their taxes.

Another confusion that people have about paying federal taxes is that many believe they pay one rate on all of the taxable amount. This is only true if all of the amount falls within the range. The $30,000 example will pay 10% on the taxable amount because the range is $0 to $16,700. While the $250,000 example will pay 10% on the first $16,700, 15% for the $16,700.01 to $67,900, 25% for the $67,900.01 to $137,050, 28% for the $137,050.01 to $208,850, and 33% for the $208,850.01 to 235,400 amount. Most that are in the $250,000 range will believe they pay at the 33% tax rate. In actuality, the effective tax rate will be about 23.6% on the taxable amount if there are no other exemptions or deductions. And on the whole amount of income the effective tax rate would be about 22.2%.

I didn't even include the standard deduction that both could claim of $11,400 if they don't itemize. The household with gross income of $30,000 will owe taxes on $4,000 or less of taxable income.


Even when income taxes are taken out from wages they are only based on income after the exemptions are applied.

[bik0]

12. You LOSE deductions as your income rises...

I'm sure that the person with $250,000 of gross income will have more deductions to claim than the one with $30,000 which reduces their taxes.

I don't know of ANY deductions that are available to high income individuals that are not available for those with low income. Can you point one out?

example of losing a deduction...

The child tax credit is phased out for taxpayers with adjusted gross income above certain thresholds.

The amount of the credit is reduced by $50 for each $1,000 by which the taxpayer's adjusted gross income exceeds the threshold amount. The threshold amount is:

$110,000 in the case of a joint return
$75,000 in the case of an unmarried individual
$55,000 in the case of a married individual filing a separate return

[LiberalFighter]

17. I didn't say they weren't eligibible for those deductions or exemptions.

I said that "both sides get additional exemptions or deductions that the other normally doesn't receive."

[bik0]

18. Can you be more specific or give me an example?

[jmowreader]

21. There are some deductions that are effectively only available to high income filers

Look at Schedule A. The only way you can use itemized deductions is if they work out to more than the standard deduction. Right now the standard deduction's high enough that a lot of homeowners can't itemize.

[bik0]

23. There's no income requirement or exclusion for either the standard deduction or itemized deductions

That's my point. It depends on your expenses i.e. mortgage interest, property taxes, medical bills etc.

No one gets a special break because they have more income.

On the contrary, if you have high income there's a higher threshold for some itemized deductions...

Medical expenses that exceed 7.5% of your adjusted gross income.
Various miscellaneous expenses that exceed 2% of your income such as: union dues, tools and supplies needed for work, tax preparation fees, some legal fees, and many more.

http://financialplan.about.com/od/taxplanning/a/ItemizingTaxes.htm

[annabanana]

5. Looks like stimulus to me...

Looks like a tax cut for those at the bottom of the pile.

[Liberal_in_LA]

9. wow

[blogslut]

13. Where's the stats on those corporations that pay little to nothing in taxes?

Why are you bringing this Koch Foundation crap to this board?

[bik0]

14. Here you go...

(Reuters) - Most U.S. and foreign corporations doing business in the United States avoid paying any federal income taxes, despite trillions of dollars worth of sales, a government study released on Tuesday said.

U.S. | BARACK OBAMA | BONDS

The Government Accountability Office said 72 percent of all foreign corporations and about 57 percent of U.S. companies doing business in the United States paid no federal income taxes for at least one year between 1998 and 2005.

More than half of foreign companies and about 42 percent of U.S. companies paid no U.S. income taxes for two or more years in that period, the report said.

During that time corporate sales in the United States totaled $2.5 trillion, according to Democratic Sens. Carl Levin of Michigan and Byron Dorgan of North Dakota, who requested the GAO study.

The report did not name any companies. The GAO said corporations escaped paying federal income taxes for a variety of reasons including operating losses, tax credits and an ability to use transactions within the company to shift income to low tax countries.

With the U.S. budget deficit this year running close to the record $413 billion that was set in 2004 and projected to hit a record $486 billion next year, lawmakers are looking to plug holes in the U.S. tax code and generate more revenues.

Dorgan in a statement called the report "a shocking indictment of the current tax system." Levin said it made clear that "too many corporations are using tax trickery to send their profits overseas and avoid paying their fair share in the United States."

The study showed about 28 percent of large foreign corporations, those with more than $250 million in assets, doing business in the United States paid no federal income taxes in 2005 despite $372 billion in gross receipts, the senators said. About 25 percent of the largest U.S. companies paid no federal income taxes in 2005 despite $1.1 trillion in gross sales that year, they said.

http://www.reuters.com/article/idUSN1249465620080812

[blogslut]

15. Now, about the Koch Foundation

You are aware that the Tax Foundation is funded by the Koch family, aren't you? Do you know who the Koch family is?

[bik0]

16. Koch = Cato/ libertarian

Didn't know that before the OP but does that change the facts?

[blogslut]

19. It changes the slant

This article does its best to vilify honest taxpayers by naming them "non-payers". When in fact, the employed portion of these people did pay taxes - F.I.C.A. & SS withholding. The correct description would be that this large number of citizens owed no tax. But that description wouldn't blend as well with the "lazy tax-cheating lower class" theme that Koch is attempting to promote.

EDIT ADD: The Koch family is not libertarian. They are as conservative/right-wing as they come.

[bik0]

20. There's no tax deductions or exemptions that apply to FICA or SS

The majority of the tax base is generated by federal income tax. The term "non-payers" is correct when talking about FIT. I didn't see anything in the article to lead me to believe they were accusing or inferring people not paying FICA or SS tax.

from Wikipedia...

Political activities

Koch is a libertarian and supports many free-market organizations such as the Cato Institute, which he founded together with Edward H. Crane and Murray Rothbard in 1977.<3> Koch also funds the highly selective Charles G. Koch Summer Fellow Program through the Institute for Humane Studies.
Koch Industries and its subsidiaries, of which Koch is 42% owner, spent more than $20 million on lobbying in 2008, according to the non-partisan Center for Responsive Politics.

http://en.wikipedia.org/wiki/Charles_G._Koch

[blogslut]

22. You're adorarable!

http://www.sourcewatch.org/index.php?title=Koch_Industries

Koch senior founded the John Birch Society.

But you go right ahead and do whatever it is you think you're doing.