Senior Director of Federal Tax Policy
Have you heard the one about how nearly half of Americans don’t pay taxes? Nonsense, as the recent Congressional Budget Office report on income inequality reminds us.
As we have explained, in a typical year around 35-40 percent of households don’t owe any federal income tax. But most of them pay a significant share of their incomes in other taxes — particularly payroll taxes, as the CBO report points out:
Moreover, these figures don’t consider the significant state and local taxes that virtually all Americans pay — taxes that, like federal payroll and excise taxes, tend to demand more of lower-income people relative to their incomes.
When you count all taxes — federal, state, and local — the bottom fifth of households paid 16 percent of their incomes in taxes in 2009, on average, according to Citizens for Tax Justice.
Let’s put the canard about non-taxpaying Americans to rest once and for all.