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1 Scott A. Hodge, Number of Americans Paying Zero Federal Income Tax Grows to 43.4 Million 1 (2006)

handle is hein.taxfoundation/fffexz0001 and id is 1 raw text is: FOUNDATION March 30, 2006 Number of Americans Paying Zero Federal Income Tax Grows to 43.4 Million by Scott A. Hodge With the April 17th deadline for federal tax returns looming, Americans are sharply aware of their federal income tax liabilities. However, one aspect of federal income taxes they may not be aware of is the growing number of Americans who pay zero federal income tax after taking advantage of deductions and credits. During 2006, Tax Foundation economists estimate that roughly 43.4 million tax returns, representing 91 million individuals, will face a zero or negative tax liability. That's out of a total of 136 million federal tax returns that will be filed. Adding to this figure the 15 million households and individuals who file no tax return at all, roughly 121 million Americans-or 41 percent of the U.S. population-will be completely outside the federal income tax system in 2006.1 This total includes those who pay no tax, and those who pay some tax upfront and are later refunded the full amount of the tax paid or more. Who Are the Non-Payers? Using IRS data, we are able to create a profile of these individuals who are outside the federal income tax system. As Table 1 shows, those who file as single or head-of- household are much more likely to be non-payers. One-third of single filers pay nothing in federal income taxes, and almost two-thirds of those who file as head of household pay nothing. In contrast, just 22 percent of married filers are non-payers. Why do many single filers face zero tax liability? One reason is that single filers tend to be younger and earn lower incomes than married filers-especially single parents who file as head-of-household. As a result, married taxpayers pay roughly 75 percent of all federal income taxes, despite filing only 40 percent of returns. Table 1. Projection of Filing Status of Non-Payers, Tax Year 2006 ................................... i....i......ta t.................................................i.e.e..t o.............i.............Pe r c e n t..o f..All.No n -P a y e r s..... Filing Status Percent of Returns in Filing Percent of All Non-Payers Status That Are Non-Payers Who Are in Filing Status Single 33.l%: 42.2% Married filing jointly %:5o 2.0 ...............i 211 5% :. 2 9 .8% i Married filing separately 21.6%.. 1.2% I-Head of household 65.7% 26.6% Source. Internal Revenue Service, Tax Foundation.

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