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How Many American Households Are Not Paying Federal Income Taxes?

October 12, 2015

 

Mitt Romney, the 2012 Republican presidential nominee, did irreparable damage to his campaign when he asserted that the 47 percent of Americans dependent on government who don’t pay federal income taxes would back President Obama “no matter what.” While one could quibble with the political message, it looks like the statistic was as close to being right as any uttered from a politician.

 

This week the The Tax Policy Center, a joint effort by the Urban Institute and the Brookings Institution, said the number of households that don’t pay federal income taxes was 45.3 percent or, 77.5 million households. Although less thanthe Romney figure of 47%, the percentage is  statistically not that much different.

 

Addressing that issue, the Tax Policy Center noted the surge in their number from 2013 is largely thanks to better data tracking tools, according to the Center's Roberton Williams. “Those additional non-payers were there all the time -- we just failed to count them,” he said in a blog post.

 

That said, the Center still projects that the percentage of non-payers will fall over time, just more gradually than previously thought.

 

“We now estimate that 40 percent of tax units won’t pay tax in 2025, higher than our previous projection of about one-third,” Williams said.

 

While the Center, the Treasury Department and the Joint Committee on Taxation all try their best to give a proper estimate of the amount of non-payers, their figures shouldn’t be accepted as gospel truth, in part because some people don’t file returns or may have had taxes withheld during the calendar year.

 

Williams stressed that just because people don’t pay federal income taxes doesn’t mean they don’t contribute in some way. In fact, a majority of them work and therefore are on the hook for payroll taxes. They also pay local sales tax and state taxes.

 

Adapted from The Fiscal Times.

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