Record Number of Tax Filers Paid No Federal Income Taxes in 2008

March 10, 2010

About 51.6 Million Filers Were "Nonpayers," Including Some Families Making Over $50,000

Washington, DC, March 10, 2010 -- A record number of the 142 million tax returns filed in 2008 resulted in no tax payment, according to a Tax Foundation analysis of IRS data. That means the tax filers got back every dollar that had been withheld from their paychecks, and often more. Roughly 51.6 million tax returns, or 36.3 percent, were filed by such "nonpayers," people whose exemptions, deductions and credits wiped out any federal income tax due.

A family of four earning more than $50,000 can have no income tax liability after taking the standard deduction and the child tax credit.

"Two records were set in 2008: the most nonpayers and the highest-earning nonpayers," said Tax Foundation President Scott Hodge, who authored Tax Foundation Fiscal Fact, No. 214, "Record Numbers of People Paying No Income Tax; Over 50 Million 'Nonpayers' Include Families Making over $50,000." The Fiscal Fact is available online at http://www.taxfoundation.org/legacy/show/25962.html.

"Nonpaying status used to be a sure sign of poverty, but thanks to increased use of the tax code to deliver social benefits, incentivize behaviors and funnel money to targeted groups, middle-class families have now been pulled into the growing pool of nonpayers," Hodge said. "We're now in a situation where a record number of tax filers are completely disconnected from the cost of government."

The number of nonpayers has increased by 59 percent in less than a decade, growing from 32.6 million in 2000 to 51.6 million in 2008. In the same time period, the total number of tax filers grew by only 10 percent.

The last record for the number of nonpayers was set in 2006, when 33 percent of tax filers paid nothing. A record has been set every year since 2002 (30.1 percent), as tax cuts throughout the Bush years - especially the refundable child tax credit - pushed low- to middle-income people off the federal income tax rolls. The major tax change in 2008 was the Economic Stimulus Act of 2008, included tax rebates that boosted the number of nonpayers.

The number of nonpayers has increased by 59 percent in less than a decade, growing from 32.6 million in 2000 to 51.6 million in 2008. In the same time period, the total number of tax filers grew by only 10 percent.

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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To schedule an interview, please contact Natasha Altamirano, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or naltamirano@taxfoundation.org.

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