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Almost 44% of Americans Pay No Federal Income Taxes

The political left whines that the rich do not pay their 'fair' share, and one of last year's vice-presidential candidates, John Edwards (D), was famous for his "Two Americas" speech. As usual, the facts tell a different story. The summer issue of the Tax Foundation's newsletter, Tax Watch, reports that we are a "nation of nonpayers" with "forty percent of Americans outside (the) income tax system." According to Scott Hodge, the foundation's president, "The number of Americans who paid no income taxes because of deductions and credits in the tax code has varied greatly since 1950 . . . (b)ut in recent years it has spiked to record levels (32.4%), and the trend line does not appear to be slowing." In addition, another 11.4% "earned some income last year but not enough to be required to file a tax return." Together, 57.5 million Americans "pay no federal income tax." We growled about this early this summer, but publication of the Tax Watch newsletter reinforces the need to growl some more.

The National Taxpayers Union has several charts for tax years 1999-2002 which show who pays income taxes. Some numbers from 2002 are the following:

Percentile Ranked by AGI/AGI Threshold/Cum. Percent of Fed. Income Tax
Top 1%/$285,424/33.71%
Top 5%/$126,525/53.80%
Top 10%/$92,663/65.73%
Top 50%/$28,654/96.50%
Bottom 50%/<$28,654/3.50%

Quoting Hodge, again, "America is becoming divided between a growing class of people who pay no income tax, and a shrinking class who bear the majority of the burden . . .That makes tax reform politically difficult, since reform would require drawing these non-payers back into the tax system in order to broaden the tax base."