Percentage of People Not Paying Federal Income Taxes Drops

The Tax Policy Center has released new estimates projecting that the share of Americans paying no federal income tax will drop from fully half in 2008 and 2009 to just 43 percent this year and will continue to fall to just a third in 2024.

To help explain why the number of people paying no federal income tax is falling, the tax research group, which is a joint effort of the think tanks the Urban Institute and the Brookings Institution, has also developed a video and blog post.

The TPC’s research found that 43.3 percent of households pay no federal income tax in 2013, while 56.7 percent pay federal income taxes. Of the households that pay no income taxes, approximately two-thirds do pay payroll taxes, leaving just 14.4 percent who don’t pay either payroll taxes or federal income taxes. However, the TPC pointed out that most Americans pay some taxes, such as state and local taxes, sales taxes, property taxes, gasoline taxes and so-called “sin taxes” on items such as liquor and cigarettes.

The idea that nearly half the population pays no income tax gained notoriety during last year's presidential election when Mitt Romney was aught by a hidden camera talking about the "47 percent" who would vote for President Obama "no matter what."

Of the 14.4 percent of people who pay neither federal income taxes nor payroll taxes, about two-thirds of them are elderly and living on fixed incomes. Most of the rest are not elderly, but have income under $20,000. Less than a tenth of them are nonelderly with income over $20,000, or about 1.3 percent of the overall population.