Nearly half of U.S. households escape federal income tax

Updated 24m ago
By Stephen Ohlemacher, Associated Press Writer

WASHINGTON — Tax Day is a dreaded deadline for millions of Americans, but for nearly half of U.S. households, it's simply somebody else's problem.
About 47% will pay no federal income taxes for 2009. Either their incomes were too low, or they qualified for enough credits, deductions and exemptions to eliminate their liability. That's according to projections by the Tax Policy Center, a Washington research organization.

The vast majority of people who escape federal income taxes do pay other taxes, including federal payroll taxes for Social Security and Medicare, and excise taxes on gasoline, aviation, alcohol and cigarettes. Many also pay state or local sales, income and property taxes.

Most people still are required to file federal income tax returns by the April 15 deadline. The penalty for not filing is limited to the amount of taxes owed, but it's still almost always better to file: That's the only way to get a refund of income taxes withheld by employers.

In recent years, credits for low- and middle-income families have grown so much that a family of four making as much as $50,000 will owe no federal income tax for 2009, as long as there are two children younger than 17, according to a separate analysis by the consulting firm Deloitte Tax.

Tax cuts enacted in the past decade have been generous to wealthy taxpayers, too, making them a target for President Barack Obama and Democrats in Congress. Less noticed were tax cuts for low- and middle-income families, which were expanded when Obama signed the massive economic recovery package last year.

The result is a tax system that exempts almost half the U.S. from paying for programs that benefit everyone, including national defense, public safety, infrastructure and education. It is a system in which the top 10% of earners — households making an average of $366,400 in 2006 — paid about 73% of the income taxes collected by the federal government.

The bottom 40%, on average, make a profit from the federal income tax system, meaning they get more money in tax credits than they would otherwise owe in taxes. For those people, the government sends them a payment.

The federal income tax is the government's largest source of revenue, raising more than $900 billion — a little less than half of government receipts — in the budget year that ended last Sept. 30.

In 2007, about 38% of households paid no federal income tax, a figure that jumped to 49% in 2008, according to estimates by the Tax Policy Center.

http://www.usatoday.com/money/perfi/tax ... axes_N.htm