September 23, 2021

61% of Americans paid no federal income tax last year, study finds

Nearly 61% of Americans paid no federal income tax in 2020, a temporary spike attributed to a sudden drop in income and a massive increase in government grants during the coronavirus pandemic, according to a new study released this week .

Data released Wednesday by the Urban-Brookings Tax Policy Center shows 106.8 million U.S. households owed no taxes last year – a significant jump from 2019, when 75.9 million paid no taxes .

IRS BEGINS ISSUING UNEMPLOYMENT TAX REFUNDS TO SOME AMERICANS

“The number of households that paid no income tax last year was truly impressive,” wrote Howard Gleckman, senior researcher at the Tax Policy Center. “But keep in mind: it was only temporary.”

The increase stems from the spike in unemployment caused by the pandemic – some 20 million Americans lost their jobs when the economy shut down – and the government’s unprecedented response to the economic downturn, including three stimulus checks , an increase in federal unemployment benefits and an expansion of the child tax credit.

Since stimulus checks were designed as refundable tax credits, they have significantly reduced taxes payable in 2020 and 2021, according to the analysis – and in some cases, tipped some households off the table. income tax not to.

THE INCREASE IN TAX PROPOSED BY BIDEN OF 39.6% WOULD EXPECT THESE INDIVIDUALS, FAMILIES

Essentially, no household earning less than $ 28,000 will pay federal income tax this year, nor will the majority – about 75% – of those earning between $ 28,000 and $ 55,000. Among middle-income households, about 43% will pay no federal income tax.

Yet while many households did not pay federal income tax, many Americans still owed payroll taxes or state income taxes; the study shows that about four in five people paid at least one of these taxes. Almost everyone has paid the government in some other form, be it through state and local sales taxes, excise taxes, property taxes, or state income taxes.

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Households that do not pay federal income tax are expected to plunge to $ 75 million next year, or just under 42%. By 2026, the number of Americans who do not pay federal income tax is expected to drop to about 40% under current law. And middle-class Americans are likely to see their taxes payable increase in the years to come; by next year, only about 21% will be non-payers. This figure is expected to drop to 18% in 2026.


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