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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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