For some, federal taxes are the bane of their existence. With ever-changing rules and the economy still struggling to get back up to par, taxpayers are undoubtedly outraged when they feel someone else isn’t holding up their end of the deal. Hard-working citizens who are shelling out tax dollars often gripe about those who are not contributing their fair share to the taxman. It’s easy to point the finger at the low income sector of society or those wealthy citizens who seem to receive unending tax breaks but things are not always as they appear at first glance.
In an interesting statistic, it is noted that about half of taxpayers paid no federal income tax last year. While that sounds like a very high percentage of people not required to pay Uncle Sam, the statistic does not mean that these same people paid no taxes at all. Many still had to pay out for Social Security and Medicare payroll taxes. Property taxes were also paid plus a variety of sales tax had to be paid out as well.
Who’s Not Paying?
Those quick to criticize this statistical statement also claim that only the hard working Americans are paying taxes and those who are on welfare or even the mega-wealthy folks don’t pay out a dime. This is serious misconception. In reality, those people who pay no federal income tax are typically the elderly and those who do not make much money at all. Those families earning incomes of less that $20,000 will likely not pay out in federal taxes.
As we are still struggling to beat back the recession, it should be noted that there was a tremendous amount of job loss during the last few years. Along with no income or less income after taking a new job, the amount of income tax due also goes down. As time goes by, the number of Americans not paying federal income taxes will also decrease. As jobs become more plentiful and wages increase, so will tax responsibilities.
Tax Relief Measures
One of the biggest reason people have not had to pay out much, if at all, in federal income taxes is due to the Earned Income Tax Credit. This credit was brought about in 1975 and over the years has been expanded under different Presidents. People who are working at low wages can use the credit from low wages to cancel out their liability for income taxes. The Earned Income Tax Credit and the child care credit were established to encourage people to keep working.
Not a New Concept
Historically, not owing federal income taxes is not a new concept. Before World War II, rarely did an American pay income tax. In the 1950’s, most only paid a very small percentage in Social Security tax. Medicare taxes were not yet established then. Today, workers are actually paying more in payroll taxes than they are in federal income taxes.
While the 50% statistic can be startling to people at first glance, the percentage certainly dwindles down to near nothing when you consider all of the other taxes being paid out by both working and non-working individuals. It is easy for some to feed off the notion they are being cheated in the tax arena but for decades, the government has been making decisions based on removing low-income working families from the income tax lists. Right now the policy is working as it was meant to work. As income levels pick back up, the percentage of those not paying federal taxes will begin to decline rather quickly.
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