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Looking At Who Pays What In Taxes

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The midnight dash to the post office has given way to hitting the "send" button, as more people file their taxes electronically. Meanwhile, a new Gallup poll finds that about half of all Americans think their taxes are too high. For millions of others, though, the income tax is not taxing at all.


The midnight dash to the post office has given way to the midnight hitting of the send button as more and more people file their taxes electronically. However you file, tonight's deadline is fast approaching. A new Gallup poll finds that about half of Americans think their taxes are too high. For millions of others, though, the income tax isn't taxing at all.

And NPR's Scott Horsley reports.

SCOTT HORSLEY: If you're still wrestling with receipts or trying to figure out the difference between an exemption and a deduction, here's a little number to make your calculator freeze up: Bob Williams of the Tax Policy Center, here in Washington, estimates 45 percent of American households owe no income tax this year - as in zero.

Mr. BOB WILLIAMS (Tax Policy Center): I think there are a lot of people who are writing checks today who wish they were in that 45 percent. On the other hand, they probably wouldn't want to switch a lot of other things about their lives with those folks.

HORSLEY: We're not talking here about millionaires with secret Swiss bank accounts, and for the most part we're not talking about the really poor with no income to tax. Most of the 45 percent who owe no tax today are low to moderate income earners who qualify for some of the many loopholes scattered through the U.S. tax code. Williams says that's because the federal government uses the code not just to raise money but also to carry out a lot of social policy.

Mr. WILLIAMS: Talking about what people's tax liabilities are is not talking just about their responsibility to help pay for government but also what benefits we want to provide people to support various activities - going to college, buying a house, saving for retirement, raising children, all the things that we think are good things to do, and we decided to support them through the tax system.

HORSLEY: The fact that some households escape the income tax is not new, but the number of households in that category has been growing, in part because of the economic downturn but also because of tax cuts.

Economist Diane Lim Rogers, who's with the deficit watchdog Concord Coalition, sees a potential problem when nearly half the country is off the hook for paying income taxes.

Ms. DIANE LIM ROGERS (Concord Coalition): It doesn't force most Americans to feel like they have a stake in the decision about whether a form of government spending is worth doing. The more the government suggests to them that the cost can be put on someone else, the less likely it is that citizens are going to let their politicians know what they really care about versus what they just think is nice if it's free.

HORSLEY: Most of the people who don't pay income taxes do contribute payroll taxes, which help to cover the cost of Social Security and Medicare. But at just 15 percent of the economy, overall federal tax receipts are now at their lowest level since 1950.

The 400 richest households now pay an average of 17 percent in taxes, down from 26 percent two decades ago. All of which raises a question about this frequent GOP refrain.

Representative ERIC CANTOR (Republican, Virginia; House Majority Leader): Mr. Chairman, the federal government is broke.

Senator JIM DeMINT (Republican, South Carolina): The country is nearly broke.

Representative JOHN BOEHNER (Republican, Ohio; House Speaker): We're broke.

HORSLEY: Congressman Eric Cantor, Senator Jim DeMint and House Speaker John Boehner insist overspending is the cause of the nation's deficit, and that spending cuts are the only solution. But the Tax Policy Center's Williams says undertaxing is also a factor.

Mr. WILLIAMS: Right now, we're in a situation where we are spending too much and collecting too little. It's hard to argue that one or the other is at fault exclusively. You'd have to have awfully large tax increases in order to close the fiscal gap on the tax side. We'd need very large cuts on the spending side to do it only on the spending side, and it looks almost certain that we have to do some of each in order to bring the budget under control.

HORSLEY: Both President Obama and House Republicans have talked about doing away with some of those tax loopholes. Presumably that would mean fewer households in the future for whom the tax deadline is a big nothing.

Scott Horsley, NPR News, Washington.

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