Federal income tax: Who doesn't pay it and why?(Read article summary)
The 46 percent of Americans who don't pay federal income tax can be divided into those who have no taxable income and those who have enough tax breaks to wipe out their tax liability.
Mary Knox Merrill/The Christian Science Monitor/File
The percentage of Americans who donâ€™t pay income tax is making headlines again. However, the story hasnâ€™t changed since IÂ bloggedÂ about it last year and my TPC colleagues and I analyzed why in aÂ longer paper. In 2011, 46 percent of tax units paid no federal income tax. Half of them had no taxable incomeâ€”the standard deduction and personal exemptions exceed their income.Â The other half get enough tax breaks to wipe out their basic tax liability.
Itâ€™s worth noting that the percentage hasÂ changed over time, rising and falling as the economy fluctuates and Congress enacts short-term stimulus tax cuts. Looking forward, weÂ projectÂ that the percentage will fall below 40 percent by the end of the decade, even if Congress makes the Bush-era tax cuts permanent.