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As 2015 comes to a close, we're taking a look back at...
- The Tax Policy Blog
- Some Nonpayers Do Pay Income Tax
Some Nonpayers Do Pay Income Tax
I wanted to follow up on my previous post about different ways to define a "nonpayer" with some data from the IRS. Yesterday I talked about three possible definitions of a nonpayer of federal income tax: 1) someone whose federal income tax liability is zero or negative (the standard definition and the one Mitt Romney meant), 2) someone whose effective marginal tax rate is zero or negative, or 3) someone who has no taxable income. The IRS has readily accessible data for definitions 1 and 3 (though 2 requires much more work), so I've made a chart showing the percentage of filers whose income tax liability is zero or negative (the broader definition) and the percentage of filers whose taxable income is zero (a smaller, but still significant, group of people).
There are plenty of filers who have no income tax liability but do have taxable income (16% in 2009) - it's just that the credits they get back equal or exceed the tax they owe. However, these people still have an interest in keeping tax rates low, because their bottom line tax liability, while negative, is nevertheless still affected by statutory tax rates.
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The Tax Policy Blog is the official blog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.