so who pays no income tax?

[flowerseverywhere]

I keep reading that 45% of individuals pay no federal income tax. I tried to figure out how that could be and found some statistics.

from CNN

http://money.cnn.com/2011/04/14/pf/t...taxes/?cnn=yes

68% have incomes less than $50,000

of course that means 32% have an income more than that.

the article goes on to point out that many in this category still pay property and payroll (SS and medicare) taxes. But it blows my mind. I asked around and all of our friends are very average and middle class- some of us who are very frugal probably qualify at the lower end of upper middle class- and none of us could figure this out. Even an elderly family member, who lives a very low income lifestyle paid federal tax.

[Bastelmutti]

I was wondering about this also when I read that even unemployment benefits are taxable.

[catherine]

I was wondering about this also when I read that even unemployment benefits are taxable.

I've always thought that taxing unemployment benefits makes absolutely no sense at all. What's the point of that? If you're unemployed, you are spending what little you're getting--you're not saving a portion for your tax burden. I guess it makes sense if you come off unemployment and then can do some catch-up withdrawals to the IRS, but still...I just don't get it.

[Alan]

This is a couple of years old, but perhaps you can get an idea of who's paying and who's not from it.
http://www.taxpolicycenter.org/Uploa...9_who_pays.pdf

[ljevtich]

I would love it if they could make paying taxes easier. Why can't they just take out the deductions? Have a house, great but forget getting a deduction, you have a home based business, great, but no deductions on that. Gave to charity, fabulous, but no write off. Same would be true for businesses. Take out the deductions. Have straight rates based on the money you earn. I am sure the fur would fly if this came true, but why not? Simplify and make easier for all.

[Gregg]

I had other sources with the same table as Alan's link. Keep in mind that these figures (and our discussion) are referring to Federal Income Tax, which is different that deductions taken from pay for Social Security or Medicare. It is possible, and apparently common, to have paid into each of those programs and still have a zero Federal Income Tax liability. It may sound like splitting hairs, but it's not. Remember that the deductions for SS and Medicare fund ONLY those two programs. The Federal Income Tax goes toward funding EVERYTHING ELSE our government does.

[Spartana]

I didn't pay any fed or state taxes this year - didn't even file. The reason: I choose to retire early and live on a small income from a state pension which is only partialy taxed, and an even smaller tax free military disability pension and suppliment both of those from savings I have in tax-deferable vehicles - so only pay tax on the small amount of "earned interest" on the savings I withdraw each year to suppliment my pension. Things like old EE saving bonds, I bonds, etc... Then I only have to pay fed tax on the interest on those. Some years I need more and pay more income tax, some years I need almost nothing, so don't pay any taxes or am in the 10% bracket. That was the case this year. Since my pensions cover most of my very spartan and minimalistic lifestyle (payed for house, no debt, no expensive hobbies, etc..) I can keep my taxable income at zero or 10% depending on how much I choose to spend each year out of my savings. In the future, when I'm I'm old enough to make withdrawls on my traditional IRA's , etc.. then I'll probably have to start paying more in taxes - or not. Because by then most of my tax deferred stuff like the bonds will be gone and the income from the IRAs will make up the needed supplimental income then. And BTW, I don't live an impoverished lifestyle - very modest lower middleclass I would say. Have a house, a couple of cars, and look just like everyone else. It's just that I payed off everything while working and don't spend much at all so I don't need a high income to fund my lifestyle. It's just food on the table for single me, a small amount in utilities, gas for the compact car, and low prop taxes and insurance. Get by on less than $1,000 a ,month easy.

As far as states taxing unemployment benefits - not all states do. Calif doesn't tax them. So check with your individual states.

[goldensmom]

We have neighbors with 10 children so that makes a family total of 12. They pay state and federal income tax during the year on their income but with so many deductions get it all back so in the end they pay no taxes. I know several families in that same situation. We pay a ton of state and federal income tax on multiple incomes. My 87 year old stroke victim mother also paid federal income taxes.

[herbgeek]

This is what angers me about the "tax the rich" mentality. I think everyone should pay into the system, even if its a token few dollars, just so there is some skin in the game. I think its a shame that half the people can pay no taxes, yet vote that the other half who is paying taxes should pay even more.

[ApatheticNoMore]

I've done the calculations and it is *NEARLY IMPOSSIBLE* for a single person with no kids taking the standard deduction to not pay income taxes. My calculation was for last year not this but unless they've done a lot of inflation adjustment ....

But you have to be poor .... no, you don't understand. It is NEARLY IMPOSSIBLE for such a person not to pay taxes *EVEN IF* they are poor. I believe my calculations showed that even at MINIMUM WAGE (using the California minimum wage of $8 an hour, which is higher than some states, but so is the cost of living here), even getting an earned income credit (the earned income credit is not that generous if you don't have kids), you would STILL pay income taxes! And minimum wage here frankly would not even meet my current no fluff necessities budget (granted I could share an apartment etc.), to speak nothing of my actual budget of course which includes some non-necessities

As for people earning up to 50k not paying taxes. That's ridiculous. When by my calculation taxes were being paid on a minimum wage salary of less than 17k a year. 50k omg so ABSURD!!!!! Do you REALLY believe people earning 50k aren't paying taxes? Yea let's blame people earning 40-50k for not pulling their weight. You've sure been sold a line, haven't you?

Now this said there may be MANY people with a lot of kids or other deductions (possibly houses where houses are cheap, trust me noone around here earning a 50k household income is buying a house! the idea is completely laughable.) that are not paying taxes on incomes up to 50k but for a single renter it would be nearly impossible, like I said.