Half of All Americans Pay No Income Tax & May Get a Tax Refund Anyway

Nearly half of American households pay no taxes at all.
The AP reported:

As Monday’s tax filing deadline nears, ponder this: The super rich pay a lot less taxes than they did a couple of decades ago, and nearly half of U.S. households pay no income taxes at all.

The Internal Revenue Service tracks the tax returns with the 400 highest adjusted gross incomes each year. The average income on those returns in 2007, the latest year for IRS data, was nearly $345 million. Their average federal income tax rate was 17 percent, down from 26 percent in 1992.

Over the same period, the average federal income tax rate for all taxpayers declined to 9.3 percent from 9.9 percent.

The top income tax rate is 35 percent, so how can people who make so much pay so little in taxes? The nation’s tax laws are packed with breaks for people at every income level. There are breaks for having children, paying a mortgage, going to college, and even for paying other taxes. Plus, the top rate on capital gains is only 15 percent.

There are so many breaks that 45 percent of U.S. households will pay no federal income tax for 2010, according to estimates by the Tax Policy Center, a Washington think tank.

The sheer volume of credits, deductions and exemptions has both Democrats and Republicans calling for tax laws to be overhauled. House Republicans want to eliminate breaks to pay for lower overall rates, reducing the top tax rate from 35 percent to 25 percent.

Also, there are millions of Americans who pay no taxes but get a refund anyway.
This redistributive policy doesn’t get a lot of media attention as you would expect.
Newsmax reported on this socialist feature to the US tax code in 2005.

A married couple with three children and $40,000 in income can take a $9,700 standard deduction and $15,500 in personal exemptions, bringing their taxable income down to $14,800. They would owe $1,505 in taxes.

But with three children, they would get $3,000 in child credits, leaving them with no taxes owed – and a $1,495 refund check.

So in today’s America you can actually receive more back from the government than you paid in during the year. That’s socialism.

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  • Mark1957

    More proof that the “evil rich” need to pay more taxes, that family should get at least a $5000 “Refund” back. / sarc.

  • http://alwaysonwatch3.blogspot.com/ Always On Watch

    Those of us who are self-employed get socked with that SE tax.

    This household owes little in federal taxes due to sky-high medical expenses. But there is no exemption from SE tax.

  • FAADAN

    No matter how much the government takes from all of us, they will spend more than they take in. The only way to reduce the size of government is to cut off their money supply all together. The budget will never be balanced by raising taxes. It will only be balanced by cutting the size of government.

  • Ginger

    The IRS system needs to focus on the “earned income credit” before they try to rob the rich even more. I do not consider a person making $200,000 a year rich that the evil doers wants to punish them even more. $200,000 income people are small business owners! The IRS needs to fix the system on their side and stop sending refund checks to people in prison. Give me a break!

  • http://www.ilike.com/artist/Ritchie+the+Riveter Ritchie The Riveter

    One of the reasons I like the Fair Tax, is because that … even with the pre-bate feature to provide some progressivity at lower-income levels … EVERYONE sees what their government costs them, every time they buy something.

    And the Regressives’ “Tax the Rich” argument misses the fact that too often, the less-than-rich pay a price as well. In the company I work for, if our owner’s taxes go up, we ALL get less because his practice is to pass on a significant percentage of company profits to us, in retirement accounts and year-end bonuses.

    But when you think of the less-than-rich as simple-minded wage-slaves who must be saved from themselves by the Best and Brightest, you tend to miss problems like this that exist in your policies.

  • http://www.ilike.com/artist/Ritchie+the+Riveter Ritchie The Riveter

    FAADAN … I and history agree with your take on the problem.

    Problem is, we’ve tried starving the beast, but it keeps on spending.

    We have to DIRECTLY attack the spending now, before the debt crashes its circulatory system and it collapses on top of our future to crush it.

  • Ginger

    This is all planned…from the puppet and the puppet masters!

  • LimoLibsStink

    0bama:

    What is the big deal? I have never been a Net Taxpayer in my life. And, I am proud of it! My Illegal Aunt has never paid any taxes and she is proud of it!

    Look, Michael Moore has had some bad years and has never paid any taxes. He is one of my close cronies. Barney Frank deducts his medical bi-daily colonic treatments and has never paid any taxes. He is also one of close my cronies.

    I deduct my medicinal marijuana and get a big deduction. I am my own crony! In fact, most Democrats have never paid any net taxes – like me! Isn’t that wonderful!

    Sure, I get a paycheck from the US treasury minus some tiny deduction for “taxes” but I am a net tax recipient – as are my cronies! This is win-win situation for me and my cronies! I say bloat the Federal Government with useless cronies! Let the Taxpayers eat it!

    With my huge pool of Czars and Cronies feeding at the Federal trough… including the WIC, Food Stamp and other Federal trough feeders, it is no wonder why half of Americans pay no income tax. I take all the credit!

    I am no economist but, if this trend continues I hope to bankrupt the remaining stupid Taxpayers. I can’t imagine why anybody would want to be a Taxpayer. It is a losing proposition! Bankrupt America now! Get on the dole while you can!

    My Limousine is running and Barney Frank is in the back. He really screwed Freddie and Fannie. I hope to get a pointer. Eat high gas prices and camel dung you stupid Taxpayers! Good day.

  • Ma

    Those who pay no income tax should not be allowed to vote. Ditto for illegals and dead people.

  • Marsh626

    America is becoming more and more like a 3rd world country every year. Oh well. It was a cool country while it lasted. RIP 1st world America. You couldn’t survive the leftist onslaught being waged against you.

  • Marsh626

    Agree with #9.

    The Right needs to get serious about reforming voting laws in this country. The tyranny of the leechf*cks on the productive and intelligent members of our society has reached a breaking point.

    The low IQ and lazy voting base of the Democrap Party is just voting themselves our wealth through government programs.

    You should have to pay taxes, pass a basic domestic and international knowledge test and have an IQ above 110 before you can vote.

    The retarded moochers on the Left have been deciding the fate of our nation for far too long.

  • LimoLibsStink

    0bama:

    Wait a second Ma!

    My biggest supporters are those who pay no income tax and sign their absentee ballots from the grave. How am I supposed to stay in power! They have rights. Ease up!

    My limousine is running and Axelrod has found a new cemetery. Axelrod has a stack of absentee ballots in the limo. We must be certain that their voting rights are not violated! Good Afternoon.

  • workingclass artist

    yeah…the “false” dependent class seems to be entrenched…gaming the system…

  • workingclass artist

    “Those of us who are self-employed get socked with that SE tax.” – AOW #2
    ummmm….YEP!

  • workingclass artist

    and small businesses & individual employers get sued or investigated for not hiring illegals (descrimination) or for hiring them..it’s a mess….

    and what happens when Illegal Immigrants using phony SS# “collect”…..if deducted by employers what happens….sheeesh!

  • workingclass artist

    there should be an overhaul in “non-profits” too….just sayin’

  • feduptoo

    Town Hall dot com, has a story about all the loop holes Obama took when he filed his 2009 taxes!
    He’s a hypocrite!

    Our whole Federal government system is corrupt. A couple of yrs. ago in Colorado, some illegal aliens had a Hispanic woman file taxes for them…they all claimed many kids, and other things…between those that filed with her, they got a refund over $1 million! Oh, they didn’t have all those kids they claimed either.

    We are just 2 retired people, that had several big appliances go out on us last year, and had to replace them. We took the money from our 401K to purchase these items, not wanting another bill.

    Just filed our taxes, and claimed the so-called “energy saving appliances”, and ended up paying the IRS ! Punished because we used the 401K for these products, which threw us into a different tax income!

  • Joshua

    My wife used to be friends with a hard-core liberal, who had two children and was living with the father, but they were not married so she could claim to be a single mother. In 2009, she got over $9,000 back from the government, on a less than $15,000 income (she worked as a waitress). And to top it off, she was PROUD of how she was “screwing” the rich. Felt it was her duty as a liberal to stick it to the man as much as possible.

    Needless to say, we’re not friends with them anymore…

  • StrangernFiction

    Just in case anyone missed this bit of genius from the DOTUS:

    “Pretty influential guy,” Obama said of Emir Hamad bin Khalifa al-Thani, noting that he basically owns the Al Jazeera television network. “He is a big booster, big promoter of democracy all throughout the Middle East. Reform, reform, reform — you’re seeing it on Al Jazeera.”

    But Obama: “Now, he himself is not reforming significantly. There’s no big move towards democracy in Qatar. But you know part of the reason is that the per capita income of Qatar is $145,000 a year. That will dampen a lot of conflict.”

    http://content.usatoday.com/communities/theoval/post/2011/04/obama-no-big-move-toward-democracy-in-qatar/1

  • retire05

    Newsmax is wrong; it is worse than they report.

    A married couple with three kids earning $40,000/yr gets back more than $1,495.00

    Here is how it works:

    standard deduction – $9,700.00
    personal deduction – $18,500.00 ($3,700 times 5, couple plus 3 kids)

    Total deduction $28,200 leaving an AGI of $11,800 taxable at 10% for $1,180 in taxes owed.

    The EIC credit for that family would be $5,666 minus the $1,180 owed for a refund of $4,486.00 Got that? They will get back almost $4,500.00 from you, the taxed American.

    The same couple could have an AGI of $43,350.00 and still be eligible for the EIC credit. That means that the couple would have made $43,350. + the $28,500 in deductions for a total income of $71,550. Their normal tax rate would be 15% of $43,350 on their adjusted gross income, for a tax of $6,502, but with the $5,666. EIC, they will only pay $836.00 in taxes.

    This is why lower income earnings (if you consider $71,000/yr low income) pay almost zero percentage of the federal income taxes. These people are basically zero-liability tax payers where April 15th serves them as a “get paid” day, not a “pay taxes” day.

    My spouse and I are an income/Social Security married couple. Due to the income, not having a mortgage deduction, not enough in property taxes to exceed the standard deduction, we are in the 28% bracket, which means that we paid 28% in taxes on the Social Security income, as well as the employee income.

    Millions of Americans who lost their jobs and have received unemployment benefits for the last year are also in for a big shock; those unemployment benefits are taxable and the states do not take the taxes out when those benefits are paid. So if a couple has been living on unemployment benefits for the last year, if they don’t still have kids at home, they have a heafty tax bill they are now going to have to worry about paying.

  • StrangernFiction

    #10 April 17, 2011 at 8:36 am
    Marsh626 commented:

    Boehner, Cantor, McCarthy et al are going to fight. Just you wait and see. And then we’re going to get a take no prisoners advocate for free-markets like Romney, Pawlenty, or Huckabee in the White House. The future is bright. Have a little faith. /sarc

  • Ma

    Disagree with # 22. They are continuing with the DC status quo and what will happen next will be a “independent” Perot/Trump type who will split the ticket and grease the wheels for a second Obummer term. People are outraged at the weakness exhibited by the Repub establishment on the 2011 budget “compromise” and failure to defund Obamacare. They have failed to deliver on promises made and new leadership is required now.

  • retire05

    feduptoo, if you withdrew from your 401(k) and you have yet to reach the age of 59 1/2, you had to pay an additional 10% tax penalty on that money, over and above your standard tax.

    Many people choose to retire at age 55 if their company retirement plan allows them to retire with 30+ years of service. AT & T is one of them. Most AT & T employees contribute to their 401(k) plans, thinking they can use that to supplement their retirement benefits. They are shocked to find out that when they do use that money, they get hit with a non-refundable 10% penalty, no matter what their adjusted gross income is. If you get $1,500/month in retirement benefits, and you take $20,000 out of your 401(k) for a total income of $38K, you will pay approx. $3,000 in income taxes plus an additional $2,000 in 401(k) penalties. Out of your $38K, the tax bill is around $5K.

    Also, what Obama doesn’t tell people when he says he wants to increase the tax percentage for the rich (those making $200K/yr or more) is that he also wants to penalize marrieds because his brackets are $200K for singles and $250K for marrieds.

  • kato

    No surprise how one demographic will be voting in 2012. They want their Obama Money.

    Listen to Obama’s speeches. They’re music to a parasite’s ears. Meanwhile, the people who are paying the taxes get a stern lecture.

  • Ma

    Where is Issa on Pickford? or Obummer czars? or investigating ALL govt waste, fraud and abuse? Haven’t heard a thing lately from the fearsome Issa according to the left.

  • Ma

    Maybe the producers should pull a Wisconsin in DC. Who’s up for camping at the capitol?

  • StrangernFiction

    #24 April 17, 2011 at 10:12 am
    retire05 commented:

    The DOTUS penalizes marriage through Obamacare as well.

  • workingclass artist

    The DOTUS penalizes marriage through Obamacare as well….that would be overturned if they pass gay marriage….don’t cha think?

  • Ladue Pundit

    Ginger commented:
    The IRS system needs to focus on the “earned income credit” before they try to rob the rich even more.
    ^^^^^^^
    No children/dependents are required to receive the EIC. If you are over 25 but under retirement age earning under a certain amount, you’re in. (The amount goes up each year.)Having dependents will incease your take, but is NOT necesary.

    I’ve been preparing taxes for years and can attest that MANY people will work “just enough” to get the credit. The less you work, the more you get. People will plop down a wad of W-2’s and check stubs showing they had maybe 5-6 jobs but quit around August because the schemers are smart enough to know that their EITC haul will go down.

    Michael Smerconish was on this a.m. bemoaning the fact that mortgage interest is a sacred cow and we all need to “share sacrifices.” I INVEST in my home and that creates jobs: mortgage banker, electric co., gas co., remodeling contractor, lawn care, roofer, pool guy, hell, my trash guy is a small businessman. When a home is purchased, there is a huge multiplier in the private sector.

    What stability and investment does society reap from leeches who avoid taxes and get EITC (read:welfare) from working a few months? With over 1/3 of Americans getting freebies, the deficit and my taxes will keep rising.

  • forest

    He’s been calling what is essentially welfare “tax cuts” for years now and he’s been getting away with it.

  • workingclass artist
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  • Deanna

    This is not news. The Earned Income Credit was enacted in the 70s and has been updated ever since. This particular credit is ridiculous because it’s supposed to reward those who work. When it was first enacted it was reasonable, just another deduction. But as others have pointed out it’s grown into a monster that actually rewards you for working less. And what’s ironic is that those Seniors who do work to make a little extra money no longer can get the Earned Income Credit but some lazy 25 year old, who won’t work full time or quits, can.

  • AuntieMadder

    This is nothing new; it’s been going on for years. Being single, no kids and not owning a business or any property all my working years, I’ve paid the max and each year’s tax refund check has been tiny. Knowing each year that others receive “refund” checks for amounts greater than the sum of the year’s deductions from their paychecks hasn’t made me a happy camper at all. Basically, it’s been taken from me and handed to them.

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