The 47 percent: Here's who pays no federal income tax - Economy Watch
Just who are the 47 percent?
The Tax Policy Center researchers found that about half of the group is basically exempt from federal income taxes because they are low income and also may have a large family.
In a blog released not long after its report, the TPC explained that "a couple with two children earning less than $26,400 will pay no federal income tax this year because their $11,600 standard deduction and four exemptions of $3,700 each reduce their taxable income to zero."
The other half are zeroing out their federal income tax bill with other provisions, such as itemized deductions or the child tax credit. Some are seniors who are living off Social Security.
To be clear, the people in this group are still paying taxes. They are subject to payroll taxes for things like Medicare and Social Security, federal excise taxes on things like gasoline and state and local taxes including sales taxes on items they purchase.
Not everyone who pays no federal income tax is in the lower income brackets. A separate report released last spring by the Internal Revenue Service found more than 35,000 people who made more than $200,000 in 2009 also managed to zero out their tax bills. That report noted that it generally takes a number of different credits and deductions for wealthy people to not pay any federal income taxes.
They pay Social Security and Medicare
Which federal benefits are they recieving that you say they are not paying for?
If you have a family of four and make $25,000. What federal benefits are you getting that you don't pay for?
Let's take a closer look at your "typical" family making $26,400 per year with two kids. Your source indicates that they will pay no federal income tax but will pay Social Security and Medicare taxes. This is not the case. A family of four filing jointly earning $26,400 will indeed owe no income tax, but in addition, they will qualify for a $4,132 earned income credit and $2,000 child credit, and receive a refund (tax free) of $6,132. Since the withholding for SS/Medicare would only be $1,492, they have a net federal benefit of $4,640, and have therefore not paid SS/Medicare, and the $4,640 net refund in most cases would subsidize all other taxes paid at any level. They will also most likely qualify for other non-tax related federal assistance. In fact, your family of four will not pay any federal income tax until their earnings exceed $45,750; hardly poverty level. To go a step further, the same family with four children earning the $26,400 will receive a $8,281 refund and a net tax benefit after SS/Medicare of $6,789. That family can earn up to $48,000 and their federal income tax refundable credits will still exceed their SS/Medicare taxes withheld, and will pay no federal income tax until earnings exceed $66,100.
In all the rhetoric about "fair share", the dirty little secret is that over 3/4 of the benefits derived from the "Bush" tax cuts were for the middle class; that amount has increased under the current administration.