Lots of talk today about the half of the population that do not pay federal income taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. es, based on Romney’s comment that 47 percent pay no income tax. The 47 percent number is an estimate of the share of the total population that pays no income tax, coming from the Tax Policy Center, which is in line with our estimate using IRS data, but slightly less than the 51 percent estimated by the Joint Committee on Taxation.
However, the hard data from IRS tax returns indicates that about 41 percent of filers pay no income tax, the difference being that about another 9 percent of the population does not file and thus also pays no income tax.
Looking at just the filers who are nonpayers, the IRS provides data on their income, which can be found in our recent report. This data is presented in the chart below for tax years 2001 and 2009, to show the progression of nonpayers over the last decade.
The share of filers who are nonpayers has increased dramatically over this time period, from about 27 percent in 2001 to about 42 percent in 2009, mainly as a result of the introduction and expansion of various tax creditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. s, particularly the earned income tax credit and the child credit. These provisions target low-income earners, so it should not be surprising that the vast majority of nonpayers are low-income earners. As of 2009, the reverse is true as well, i.e. the majority of low-income earners are nonpayers. For instance, in 2001 27 percent of those earning between $22,000 and $25,000 were nonpayers. By 2009, that percentage had jumped to 51 percent.
Nonpayer status has also become fairly common among middle-income earners. Of those earning between $40,000 and $50,000, 3 percent were nonpayers in 2001. By 2009 that percentage had jumped to 22 percent.
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