Many Americans discovered they don’t owe the government a dime.
More than four in 10 American households (44.3%) — or upwards
of 76 million — didn’t pay any income tax to the federal government
last year, according to data for 2016 from the Tax Policy Center. This year that number is expected to be roughly the same, at 43.9%.
Most of these people aren’t paying income taxes because they either
don’t have any income that is taxable (many fall below the poverty
line), or because they get enough tax breaks and don’t owe the
government money. Common tax breaks include the child tax credit, the
earned income tax credit (EITC), and the exclusion of some or all Social
Security income, explains Roberton Williams of the Tax Policy Center.
Of course, this doesn’t mean that this group is completely tax exempt:
“Roughly 2/3 of those paying no federal income tax work and pay federal
payroll taxes that support Social Security and Medicare; about 60% of
the rest are elderly and thus retired and not working; and most of the
rest have very low incomes,” says Williams.