Almost Half of America Will Pay No Federal Income Tax – Guess Why

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Ever wonder how many of your neighbors are NOT paying taxes to the IRS? Would you believe nearly half?

That’s right: Nearly half of American households won’t pay any federal income tax for 2015. Legally. They will legally pay ZERO income tax for 2015.

And it gets crazier. Some of them will get a tax refund anyway!

The Tax Policy Center says an estimated 45.3% of Americans do not have any 2015 federal individual income taxes to pay at all — and some of them actually have a negative income tax rate, meaning they’ll get benefits that are beyond their zero tax liability.

And it’s fairly common. The number of households that pay no federal income taxes has been rising steadily. In 2011, there were 74.8 million households that did not owe federal taxes, compared to 77.5 million in 2015.

This might make you think it’s all about rich people avoiding taxes through loopholes and other tax shenanigans, but that’s not it at all.

Of the 77.5 million, approximately half do not pay taxes because they have no taxable income at all, and the other half get enough tax breaks to compensate for their tax liability. Thanks to refundable credits like the Earned Income Tax Credit and components of the Child Tax Credit, it is possible to end up with a negative tax rate.

According to data from the Tax Policy Center, the average income tax bill per person is a negative $643 for the lower 20% of incomes and a negative $621 for the second lowest 20%. Combined, that means that the remaining 60% must pony up an extra 4% of the collective tax bill — in other words, 60% of America pays the entirety of the country’s federal income taxes plus another 4% of that bill that is redistributed to the lower 40% of taxpayers.

Meanwhile, the richest 20% of American households pay an average of $50,176 in taxes and account for 86.8% of the total federal tax bill. Households with the top 1% of income pay 43.6% of America’s tax bill, and the 115,000 households that comprise the top 0.1% pay over 20% of the tax bill.

There is no argument that the amount of households paying no federal taxes is fairly close to half. Given that many of those households are on the lower end of the economic spectrum, it is entirely possible that the number could increase under either Republican or Democratic administrations.

Originally Posted at: http://www.moneytips.com/best-states-to-die-in-for-taxes

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