How much do Nonpayers Earn? (Average Income of the 47%)

Tax Foundation ^ | 09/19/2012 | William McBride

[SeekAndFind]

September 18, 2012

By: 

William McBride

Lots of talk today about the half of the population that do not pay federal income taxes, 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 credits, 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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[Noob1999]

It would also be very interesting to find out how much “negative income tax” , (EIC, Child credits, etc) is paid to this group of non-tax payers.

[Mrs. Don-o]

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[Graewoulf]

” - - - 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.”

Duh, 41% + 9% = 50 % that pay no Personal Federal Income Tax.

Double Duh: What % is an equal shot “Fair Share?”

[stremba]

It’s not quite that simple. 41% of filers pay no income tax. The set of filers is only a subset of the population at large, so 41% of filers would be less than 41% of the total population. Therefore, the percentage of the population who don’t pay would be the 9% of nonfilers plus the <41% of the population who file and don’t pay.

Nonetheless, the point is that the percentage of non-payers is too damn high.

[Darth Reardon]

Nope. Since 9% of people do not file, 41% of the population that do file is only 37% of the total population.

[mvpel]

I paid zero income tax on a six-figure household income in 2006, due to the adoption expenses tax credit being roughly equal to my total tax liability. The credit actually only covered about a quarter of our total expenses for the adoption, so it’s not like we came out ahead except for having a son at the end of it all.

[generally]

Some other important things to consider:

1. What percentage of illegals are not paying anything?

2. What is the ethnic breakdown of non-payers?

3. How many of those who pay nothing are young and attending school?

4. How many are Democrats? How many are Republicans?

5. How long have they not been paying? Was this just an anomalous year for them? Or is this typical?

6. How many are seniors and retired?

But possibly the most important thing that needs to be examined is this: What is the actual income of non-payers receiving government assistance? By this I mean, what is their income if you add in all of the benefits they receive? This could include social security, unemployment, welfare, disability, food stamps, Section 8 housing allowance, and any other subsidies that they receive. I’d like to see what their effective after tax spending power is compared to those who are working. I’d like to know what the median is, what is typical. I don’t just want to hear about the carefully selected sob story that the media pushes.

[bmwcyle]

This was warned to us when they first stated the exclusions 20 years ago.

[noinfringers2]

‘Population at large’- does this include babies and young children who I don’t think should be tossed into the specific comparisons.

[tony777]

We also have to recognize that Earned Income Credit is a RINO crap that is designed to get votes - and ends up allowing illegals to use it.

[JoeFromSidney]

What it really comes down to is that the tax-eaters are nearly outvoting the tax-payers. We're close to a tipping point.

[Graewoulf]

It all boils down to a couple of questions:
1.) Who should be exempt from paying THEIR fair share of Personal Federal Income Taxes?
2.) Are YOU Taxed Enough Already?