Tax Policy Center: More and More Americans Paying Federal Taxes

Tuesday, 10 Sep 2013 07:59 AM

By Michelle Smith

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The number of Americans who don't pay Federal income tax has fallen. And the number who are liable to pay will continue increasing over the next decade, according to the Tax Policy Center (TPC).

In 2009, the TPC estimated 47 percent of Americans paid no income tax, but a new analysis shows only 43 percent will avoid a tax bill this year.

While even that number may sound large, the TPC highlights that it's a piece of data shrouded in misconception.

Editor’s Note:
Retirees Slammed with 85% Pay Cut (New Video)

This became glaringly obvious when Mitt Romney was secretly recorded bashing the 47 percent during a 2012 presidential campaign fundraiser. He called them dependent on government and accused them of believing the government has a responsibility to care for them.

"These are people who pay no income tax. Forty-seven percent of Americans pay no income tax," Romney stressed to his guests, CNBC reports.

What Romney and much of the larger public fail to consider is that few people can get away without paying federal, state and local governments in one form or another, the TCP points out.

"These people are taxpayers. That's an important point to make, I think," Roberton Williams, a senior fellow with the Tax Policy Center, tells CNBC.

When analyzing those who do not pay federal income taxes, the data show that about 29 percent of actually are working. About 3 percent make less than $20,000 a year so they are considered too poor to pay.

However, in many cases deductions and tax breaks lower workers' taxable income, eliminating their tax bills. And it isn't just low-wage earners who get a pass from paying income taxes. Data from the IRS show thousands of people with income over $200,000 have also avoided a tax bill, says CNBC.

Most workers who avoid federal income tax are still liable for payroll taxes, such as Social Security and Medicare.

Only 14 percent of Americans avoid paying both income and payroll taxes, and two-third of them are elderly, the TPC notes.

But any time these people purchase gas, tobacco, alcoholic beverages or airline tickets they are subject to federal excise taxes. And they contribute at the state and local levels through sales and property taxes.

For many, the days of relief from federal income tax are drawing to a close. Federal tax cuts that were put in place during recession are expiring. Meanwhile, the economy is recovering and as it does wages are expected to rise.

According to the TPC, these two factors are boosting the number of households that are liable for federal income taxes. The rise will continue over the next decade, and by 2024, just about 33 percent of households will be exempt.

Editor’s Note: Retirees Slammed with 85% Pay Cut (New Video)

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