Approximately 75.5 million or 43.3% of tax-filing households don’t pay any federal income tax, according to estimates from the Tax Policy Center, a nonprofit joint venture by the Urban Institute and Brookings Institution. Here's why:
President Donald Trump paid just $750 in federal taxes in both 2016 and 2017, and no federal income tax in 10 of the previous 15 years due to massive business losses, the New York Times reported Sunday. The paper said it had acquired more than two decades’ worth of tax-return data from Trump and his business organization, though it does not include his personal tax returns for 2018 and 2019. The Times said more findings from his taxes would be published in the coming weeks.
Many low- and below-average-income families pay more in payroll taxes every year than they pay in federal income taxes, according to Gary Burtless, a senior fellow at the Brookings Institution, a centrist research group founded in 1916. For the most part, he said, the U.S. individual income tax is progressive, with much heavier tax liabilities as you move up the income distribution, and very low or negative income tax liabilities at the bottom of the income distribution.
“The progressive rate structure of the federal income tax system compresses the after-tax income distribution, so it effectively makes the income tax work like insurance,” Fullerton wrote. “We pay a premium — owing more tax in good years — to retain a higher fraction of our income in bad years. How we value this insurance aspect of the income tax system can depend on how often we find ourselves not owing federal income tax.
How do voters feel about this? All but the top 20% of families pay more in payroll taxes than in federal income taxes, according to Treasury Department data cited by the Pew Research Center, a nonpartisan think tank in Washington, D.C. Some 64% of Republicans and Republican-leaning independents say the current U.S. tax system is “very or moderately fair,” while just half as many Democrats and Democratic leaners view the tax system as fair, the 2019 survey found.
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