Here’s Why Nearly Half of All American Don’t Pay Federal Income Tax
In 2011, about 46% of American households won’t pay federal incomes taxes. Roughly half of that 46% won’t have to pay taxes because they just don’t earn enough to have any liability under the law. For example, couple claiming two dependents and making less than $26,400 a year has a standard deduction of $11,600 and four exemptions of $3,700, bringing their taxable income to zero. The structure of the tax code ensures that Americans don’t have to pay taxes on subsistence levels of income, which is that amount of money deemed by the law to cover as necessary to cover basic human needs of food, clothing, shelter, etc.
Check Out This Related Feature: NYSE:GE) Got Away With Paying Zero Taxes” href=”http://www.cheatsheet.com/trading/heres-how-general-electric-ge-got-away-with-paying-zero-taxes.html/” rel=”bookmark”>Here’s How General Electric (NYSE:GE) Got Away With Paying Zero Taxes.
For the other half of the 46% of Americans not paying federal income taxes in 2011, their liabilities are wiped out by various tax expenditures. Take the elderly for example — they get an extra standard deduction, an exemption for some Social Security benefits, and other exemptions. People with children have the Child Tax Credit that was part of the Bush tax cuts. Then there are a host of other exemptions that can reduce a person’s taxable income to zero.
But while some argue that these exemptions and deductions should be repealed in order to increase tax revenue, they are only in place to ensure that an undue tax burden isn’t placed on those already struggling to make ends meet. With the exception of the occasional crook, the 46% of American households not paying income taxes wouldn’t be able to subsist on what they had left after taxes, according to the federal government, if they were granted standard deductions and exemptions that ensure they have enough money to maintain a certain standard of living.