All too often including most recently, we’ve been hearing the misleading claim that almost half of Americans pay no taxes.
While 47% of Americans did not pay federal income tax in 2011, they paid lots of other taxes, including sales taxes, property taxes, gas taxes, state income taxes, or payroll taxes.
In fact, roughly two-thirds of those who didn’t pay federal income tax were workers who did contribute payroll taxes. Seniors make up another quarter of those families who don’t currently pay federal income tax, but paid payroll taxes into the federal retirement programs for their entire working lives. The remaining households are either people with disabilities or students, who are likely to pay federal income tax in the future when they enter the workforce.
Moreover, Citizens for Tax Justice shows that the total of federal, state and local taxes paid by each income group is roughly similar to their share of total income. This is because the progressivity of the federal tax system goes some way to offsetting the regressive state and local tax systems that ask a lot more, as a share of income, from low- and moderate-income families. This is important for the overall fairness of our tax system.