More than half of US households did not pay federal income tax last year due to Covid relief funds, tax credits and stimulus, according to a new report.
The non-partisan Tax Policy Center estimates that 57% of U.S. households paid no federal income tax in 2021, up from 44% before the pandemic.
Howard Gleckman, senior fellow at the Center for Tax Policy, said Covid-related job losses, declining revenues, stimulus checks and tax credits were largely responsible for the increase.
The expanded child tax credit was an important factor. This substantially reduced “the income tax liability of more than one hundred million households and temporarily turned many of the small federal income tax payers into non-payers,” wrote Gleckman.
Gleckman predicts that after the completion of many tax programs, the number of non-payers will decrease to 42% in 2022 and to 38% by 2029.
“We predict it will decline again and remain fairly low compared to historical standards,” Gleckman said.
Federal income taxes are only part of the overall tax burden. Because most workers pay payroll taxes, the share of U.S. taxpayers who pay neither payroll nor federal income tax was just 19% in 2021, slightly higher than the pre-pandemic 17%. Taxpayers also often pay state and local taxes.
However, many conservatives and Republican politicians have seized on the rapidly growing number of defaulters to call for tax reform. Senator Rick Scott, as part of the 11-point Save America plan, said, “All Americans should pay some income tax to have skin in the game.”
IN interview with NPR, Scott, Florida, denied that he wanted to raise taxes for the poor. “I don’t believe in raising taxes,” he said.
“I’m not going to raise anyone’s taxes, but I want to talk,” he said. “We have able-bodied Americans who live off government programs, not work, and this is caused by this policy of the Democrats. And it doesn’t work. We have billionaires who don’t pay income tax.“
The Tax Policy Center has calculated that a plan calling for all Americans to pay at least $100 in income tax will generate $100 billion in revenue in 2022. However, such a plan would be highly regressive in nature, with over 80% of the tax increase paid by households earning about $54,000 or less, and 97% paid by those earning less than $100,000.
Gleckman said Scott’s claims that he doesn’t support higher taxes but wants more Americans to pay taxes are “just stupid.”
“If you have people who don’t pay taxes and you want them to pay more taxes than they do now, I don’t understand what Scott is saying. The reason people don’t pay federal income tax is because they don’t make enough money,” he said.
There are wealthy taxpayers who do not pay federal income tax in a given year, as documented in latest ProPublica articlesand they probably make up a small fraction of defaulters, Gleckman added.
“The tax code is actually quite progressive,” Gleckman said. “There may be cases where someone with great wealth has little income, or he makes a profit and makes up for it with losses or a charitable deduction. But it’s unusual.”