Two points:
by ufl (2024-02-18 18:06:20)
Edited on 2024-02-18 18:18:59

In reply to: I saw article that 40.1% didn't pay income tax in 2022.  posted by Jfs86

Cannot Reply Return to Political

(a) that’s because we adopted the suggestion of the noted leftist, Milton Friedman, who thought that it would be a good idea to give low income folks an income tax credit instead of a welfare check. If we still separated the two, nothing substantive would change, but that percentage would go down.

(b) Most of those folks pay the payroll tax. The number of folks of pay neither is less than one in five. Many of them have no income, are retired, or are self employed and income averaging or done such dodge.

A third point - the composition of the 40% of non-payors
by irishlaw2010  (2024-02-19 09:57:07)     cannot delete  |  Edit  |  Return to Board  |  Ignore Poster   |   Highlight Poster  |   Cannot reply

is dynamic.

It includes households with retirees who paid taxes for years but now have total taxable income (SS, pension, etc.) that falls below the threshold for income tax.

It includes adults in school (trade schools, associate programs, etc.) who are likely to enter the workforce at some point.

It includes some families with younger children - say a single parent with two children earning $17.50/hour (the average Wal-Mart wage as of January 2023 although their overall minimum wage appears to be $14 per the linked article) working full-time at Wal-Mart. At 40 hours a week (if you're lucky enough to be scheduled for that many hours) for 52 weeks, it would be $36,400 a year but after standard deduction, EITC, and other child tax/child care credits, you are likely looking at no federal tax obligation. But as her children grow, the parent's income potentially improves moving to a new job/position, etc, that filer may become a net income tax payor.
True
by ufl  (2024-02-19 10:07:32)     cannot delete  |  Edit  |  Return to Board  |  Ignore Poster   |   Highlight Poster  |   Cannot reply

if 40% of returns have zero income tax liability this year and 40% have zero liability next year, the number of folks who have had no total liability in the two year period is less than 40%. I'm not sure we know how much less, though.
The articles that I've seen indicate that it
by irishlaw2010  (2024-02-19 11:25:54)     cannot delete  |  Edit  |  Return to Board  |  Ignore Poster   |   Highlight Poster  |   Cannot reply

resembles a bell curve.

The younger and the older are more likely to not have federal income tax liabilities. This is a Forbes summary (which I know is not the best source) of an article from the National Tax Journal in 2019 and showed roughly 90% of people ages 25-55 pay income tax. Obviously, that data may have shifted with changing patterns of work during the Pandemic and the overall aging of the US adult population.

From the Article:
Age and non-payers
Now, Don Fullerton of the University of Illinois at Urbana-Champaign and Nirupama Rao of the University of Michigan have taken a deeper dive into the 47 percent (now 44 percent according to TPC estimates) Their findings, published in the June edition of the National Tax Journal here and summarized in TaxNotes here (paywall) are fascinating:


-The likelihood of not paying federal income tax is closely correlated to age: If you are very young or (especially) very old, you are far less likely to pay income tax than if you are working age. Only 11 percent of those age 25-55 do not pay federal income tax while more than 80 percent of those age 75 or older are non-payers.

-Relatively few people are persistent non-payers. Among those of prime working age who do not pay federal income tax in any given year, nearly one-third will do so for only one year. Almost 6 in 10 will be paying income tax within three years, and just one-in-eight are non-payers for a decade or more.

-By the way, Fullerton and Rao found a similar story when it comes to government benefits. If you include Social Security, older adults are far more likely to receive government transfer payments than younger people. And, of course, once they begin receiving Social Security, they will continue to do so for their lifetimes.

-But if you exclude their benefits and look only at working age people, the pattern looks a lot like it does for taxes. Among those who receive some government support in one year, 60 percent will get a transfer in the following year. But five years later, only about one-in-five still will be getting benefits. And after 10 years, only about 12 percent still get benefits.