As millions of Americans wrap up tax preparations for 2010, nearly half will discover (or have already found out) that they owe no Federal income taxes for last year. According to a new estimate released by the nonpartisan Tax Policy Center, roughly 45 percent of households will end up owing nothing in Federal income tax and some will even have money paid to them by the government.
69 Million Are Federal Income-Tax Free
The center’s report found that nearly 69 million households don’t have to pay Federal income taxes this year. This is largely due to the downturned economy, which resulted in a number of tax breaks handed out.
With breaks like the Earned Income Tax Credit (EITC) and the First-Time Homebuyer Credit to take advantage of, many taxpayers discovered that Federal income taxes owed were not only offset, but refunded.
But this doesn’t mean those individuals had no tax liability last year. According to the center, in addition to state and local taxes, many owed payroll taxes, which support Medicare and Social Security.
Of the number of people who don’t pay income taxes, 49 million pay payroll taxes. And of those pay payroll taxes, 34 million pay more than they get back on their Federal returns.
Households that Don’t Pay Income Taxes Include Rich
President Barack Obama recently reignited his argument that the wealthy need to pay more taxes after the Bush tax cuts extension expires. The center’s estimates on those who do and don’t pay would definitely back the argument.
Of the 69 million who don’t owe income taxes, 5 million make somewhere between $50,000 and more than $1 million. While Obama’s definition of wealthy looks at those making more than $250,000, it’s apparent that a portion of the 5 million non-payers fall into this category. The remaining 64 million earned less than $50,000.
In an interview with CNN Money, Roberton Williams, a senior fellow at the Tax Policy Center, said that very high-income households can fall into the non-payer group if their income comes from tax-exempt bonds or overseas sources for which they qualify for foreign tax credits.
This places them in the group of millions who will happy with their lack of tax liability this year as others prepare to pay on their last day to file.
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[...] Re: Why not a Consumption tax? Originally Posted by Harry Guerrilla Because everyone says it's regressive, even though we already have far more regressive taxes applied to the poor as it is. It's a selective choice against some supposedly regressive taxes. It's actually a tax hike on many people… At least 45% of Americans would get a tax hike if you changed the tax code in this manner… and it's not going to be easy to get them to agree on a tax hike. 45 Percent of Americans Don’t Owe 2010 Federal Income Taxes – Financial News for the Best Bank… [...]
Are these people that do not OWE any FIT or that do not PAY any FIT at all. To me there is a difference.
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