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Who Pays Income Taxes? A Lifetime Perspective

September 20, 2012 at 12:45 PM
Paul N. Van de Water

The current discussion of how many households don’t owe federal income tax in a particular year obscures a more important point:  over their lifetimes, the vast majority of Americans pay federal income tax.

People are much less likely to owe income taxes at the end or the beginning of their careers.  (See figure.)  Many non-income taxpayers are age 55 and over and have paid considerable income taxes during their younger, working years.  Others are students under age 25 who will pay income taxes when they complete their education and enter the full-time workforce.


As the figure shows, about 30 percent of people of prime working age (between 25 and 54) did not pay federal income taxes in 2007, the last year before the recession.  Most of these are low-income workers whose incomes were temporarily depressed and who paid or will pay income taxes in other years.

Furthermore, the vast majority of prime working-age people pay some federal direct tax.  In fact, we estimate that in 2007, 90 percent of those aged 25 to 54 paid federal income or payroll taxes or both.